Cryptocurrencies are digital or virtual tokens that use cryptography to secure their transactions and control the creation of new units. Cryptocurrencies are decentralized, meaning they are not subject to government or financial institution control.
Bitcoin, the first and most well-known cryptocurrency, was created in 2009. There are now thousands of different cryptocurrencies, collectively known as altcoins. One important characteristic of all cryptos is their token supply. This article will explain what maximum, circulating, and total supply mean in regard to cryptocurrency.
What Is a Crypto Token Supply and Why Does It Matter?
A token’s supply refers to the total amount of tokens that will ever exist. The maximum supply is the upper limit on the number of tokens that can be created, while the circulating supply is the number of tokens currently in existence and available for trade. The total supply is equal to the maximum supply plus any additional tokens that have been minted but not yet released.
The token supply is important because it affects a cryptocurrency’s price. If there is high demand for crypto with a low supply, the price will go up. Similarly, if there is a low demand for crypto with a high supply, the price will go down. The circulating and total supply also affect price, but to a lesser extent than the maximum supply.
How Is a Token’s Supply Created?
Most cryptocurrencies have a predetermined token supply that cannot be changed. This is different from fiat currencies, which can be printed by central banks at will. The total supply of a cryptocurrency is often released all at once, or over a period of time through mining or staking.
Some cryptocurrencies, like Bitcoin, have a finite supply. This means that there will never be more than 21 million Bitcoin in existence. Other cryptos, like Ethereum, have a maximum supply but not a finite supply. This means that there is no upper limit on the number of Ethereum tokens that can be created, but the total supply will eventually reach a maximum amount and then stop growing.
What Are the Different Types of Crypto Token Supplies?
There are three main types of token supplies: fixed, dynamic, and hybrid.
A fixed supply is a supply that cannot be changed. This type of supply is often used by cryptocurrencies with a finite total supply, like Bitcoin. A dynamic or variable supply can be changed if the cryptocurrency’s protocol allows it. For example, Ethereum’s supply will eventually be capped at 100 million ETH, but this number could change if the Ethereum protocol is changed.
A hybrid supply is a mix of a fixed and a dynamic supply. An example of a hybrid cryptocurrency is Augur, which has a maximum supply of 11 million REP tokens but also allows for the creation of new REP tokens through a process called “repurposing”.
Core Differences Between Maximum, Circulating, and Total Supply
Now that you know what a token supply is and how it’s created, let’s take a closer look at the three main types of supplies: maximum, circulating, and total.
Maximum Supply
The maximum supply is the upper limit on the number of tokens that can be created. This number is often predetermined and cannot be changed. Having said that, there are some cryptocurrencies with a variable maximum supply, like Ethereum. This means that the total supply of Ethereum can increase if the protocol is changed.
Key features of maximum supply:
- The upper limit on the number of tokens that can be created
- Can be fixed or variable
- Often predetermined
- Cannot be changed
Circulating Supply
The circulating supply is the number of tokens currently in existence and available for trade. This number will always be lower than the total supply. The circulating supply can sometimes be equal to the maximum supply. This is usually the case with cryptocurrencies that have a finite total supply, like Bitcoin. This means that all of the Bitcoin that will ever be created is already in existence and available for trade.
Key features of circulating supply:
- The number of tokens currently in existence
- Always lower than the total supply
- Can sometimes be equal to the maximum supply
Total Supply
The total supply is equal to the maximum supply plus any additional tokens that have been minted but not yet released. This number will always be greater than the circulating supply. For example, if a cryptocurrency has a maximum supply of 100 million tokens and 20 million of those tokens have been minted but not yet released, then the total supply would be 120 million.
Key features of total supply:
- Equal to the maximum supply plus any additional tokens that have been minted but not yet released
- Always greater than the circulating supply
- Can be fixed, dynamic, or hybrid
Now that you understand the difference between a token’s maximum, circulating, and total supply, it’s time you must understand how to calculate the maximum and circulating supply of a crypto token.
How to Calculate the Maximum and Circulating Supply?
The maximum supply of a cryptocurrency can be calculated in two ways: by looking at the code or by using an online tool.
To calculate the maximum supply of a cryptocurrency by looking at the code, you will need to find the “maxSupply” or “supply” variable in the coin’s code. This variable will usually be located in the coin’s main contract file. For example, the maxSupply of Bitcoin can be found in the BTC token’s main contract file.
You can also use an online tool like CoinMarketCap to calculate the maximum supply of a cryptocurrency. To do this, simply go to the “Overview” tab for the coin you want to check and scroll down to the “Circulating Supply” section. The maximum supply will be listed next to the circulating supply.
To calculate the circulating supply of a cryptocurrency, you will need to find the “totalSupply” or “supply” variable in the coin’s code. This variable will usually be located in the coin’s main contract file. For example, the circulating supply of Bitcoin can be found in the BTC token’s main contract file.
You can also use an online tool like CoinMarketCap to calculate the circulating supply of a cryptocurrency. To do this, simply go to the “Overview” tab for the coin you want to check and scroll down to the “Circulating Supply” section. The circulating supply will be listed next to the maximum supply.
How Total and Circulating Supply Affect a Crypto Project
The total supply and circulating supply of a cryptocurrency can have a big impact on the price of the coin. For example, if a coin has a low circulating supply but a high total supply, this means that there are not many coins available for trade but there is potential for the price to increase as more coins are released.
On the other hand, if a coin has a high circulating supply but a low total supply, this means that there are many coins available for trade but the price is likely to be driven down as more coins enter the market.
It is also important to note that some cryptocurrencies have a dynamic or hybrid total supply. This means that the total supply of the coin can change over time. For example, Bitcoin’s total supply is currently capped at 21 million but the circulating supply will continue to increase as more coins are mined.
Factors That Can Affect the Total Supply of a Crypto Token
There are a few factors that can affect the total supply of a cryptocurrency:
- The number of coins minted but not yet released: For example, if a cryptocurrency has a maximum supply of 100 million tokens and 20 million of those tokens have been minted but not yet released, then the total supply would be 120 million.
- The inflation rate: Some cryptocurrencies have an inflation rate that increases the total supply of the coin over time. For example, Bitcoin’s inflation rate is currently about four percent. This means that the total supply of Bitcoin will increase by four percent every year.
- The burning or destruction of coins: Some cryptocurrencies have a process called “burning” or “destroying” coins. This is when the team behind the project sends a certain number of coins to a public address that can never be accessed again. This reduces the total supply of the coin.
- The forks or splits of a coin: A fork or split can happen when the team behind a project decides to change the protocol of the coin. This can create two different versions of the coin, each with its own total supply.
The Future of Max, Circulating, and Total Supply as Blockchain Projects Continue to Evolve
As blockchain projects continue to evolve, we are likely to see more changes in the total supply, circulating supply, and maximum supply of cryptocurrencies. For example, some projects may choose to burn or destroy coins as a way to reduce the total supply.
Other projects may fork or split into two different versions, each with its own total supply. We may also see more projects with a dynamic or hybrid total supply as the need for different types of tokens increases. One thing is for sure, the supply of cryptocurrencies is constantly changing and it is important to stay up-to-date on the latest developments.
Concluding Thoughts!
Understanding a cryptocurrency’s maximum, circulating, and total supply is important for investors as it can give you an idea of how the price of the coin might change in the future.
The main difference between maximum, circulating, and total supply is that maximum supply is the upper limit on the number of tokens that can be created while circulating supply is the number of tokens currently in existence and available for trade. The total supply is equal to the maximum supply plus any additional tokens that have been minted but not yet released.
It is also important to remember that the total supply and circulating supply of a coin can change over time, so it is important to keep up with the latest developments for the project. Thanks for reading and I hope this article was helpful!