Maximum supply indicates the total amount of a cryptocurrency that will be created. The maximum supply is the maximum amount of a cryptocurrency that will be produced during the time it is traded on the market. When cryptocurrencies reach the maximum supply level, this means that no more of the cryptocurrency will be produced. Usually, the maximum supply is determined by the underlying protocols of the cryptocurrencies. To give an example of maximum supply, Bitcoin (BTC) has a maximum supply of 21 million. This means that if a total of 21 million Bitcoins are mined and released, no more BTC will be produced.
The largest altcoin, Ethereum (ETH), does not have a maximum supply like Bitcoin. Ethereum has no pre-set maximum supply. As of April 2022, over 120 million ETH are traded on the market.
Maximum supply and total supply are two different concepts, but they can often be confused. Maximum supply refers to the amount of a cryptocurrency that will ultimately be produced. The maximum supply is calculated by adding the assets that have not yet been produced and the total amount of assets mined. Total supply refers to the total amount of an asset that has been produced but not yet released. Total supply refers to the number of assets of cryptocurrency that are already on the market, but not all of the total supply may be in circulation.
What Are the Types of Maximum Supply in Cryptocurrency Sector?
There are different types of maximum supply in the cryptocurrency sector. Some of the maximum supply types can be listed as follows:
- Fixed Maximum Supply
- Deflationary Maximum Supply
- Dynamic Maximum Supply
- Unlimited Supply
Fixed Maximum Supply
Fixed maximum supply is a very common variant in the industry and is applied to many cryptocurrencies. Fixed maximum supplies cannot be increased or decreased, no matter how high the demand rate. Fixed maximum supply rates are set before launch, and BTC is an example of this.
Here are some cryptocurrencies with maximum supply:
- Bitcoin (BTC)
- Binance Coin (BNB)
- Cardano (ADA)
Deflationary Maximum Supply
Deflationary maximum supply is a type that decreases over time. Deflationary maximum supply is implemented to reduce the amount of inflation and increase demand. For instance, Ethereum aims for a deflationary maximum supply.
Dynamic Maximum Supply
Dynamic maximum supply is a supply that can change according to predetermined parameters. Dynamic maximum supply is a model that can change according to supply, demand, and inflation. Dynamic maximum supply aims for more flexible market conditions.
Unlimited Supply
Unlimited supply refers to the fact that a cryptocurrency does not have a maximum supply. So if a cryptocurrency has no maximum supply, it means that an unlimited amount of cryptocurrencies can be produced.
Some cryptocurrencies with unlimited supply can be listed as follows:
- Ethereum (ETH)
- Dogecoin (DOGE)
- Polkadot (DOT)
How to Achieve Maximum Supply?
Cryptocurrencies are divided into two different types: mineable and non-minable. Mineable cryptocurrencies have an increasing circulating supply and therefore reach maximum supply levels in the future. When the maximum supply is reached can vary depending on the network miners. For instance, Bitcoin's maximum supply is 21 million, and more than 19 million BTC have been produced to date. Until BTC reaches its maximum supply, miners will continue to mine Bitcoin.
Cryptocurrencies that cannot be mined are not released once their maximum supply has been determined. As miners produce new cryptocurrencies, the circulating supply increases.
What Is Circulating Supply? Maximum Supply and Circulating Supply
Circulating supply refers to the total amount of cryptocurrencies released into the market. As an example, BTC has a maximum supply of 21 million, but approximately 89% is in circulation. Maximum supply and circulating supply are important factors in the value of cryptocurrencies.
What Happens When Circulating Supply Achieves Maximum Supply?
If the circulating supply is equal to the maximum supply, this means that the entire quantity of cryptocurrencies has been released. The price of the relevant cryptocurrency may gain or lose value depending on market conditions. As an example, the circulating supply and maximum supply of Litecoin (LTC) is 84 million. This indicates that all Litecoins have been produced and released.
