Maximum supply refers to the absolute maximum number of coins or tokens that a cryptocurrency can ever exist. The project code which contains the limit and the protocol rules which govern the system both establish permanent boundaries that require network governance to change before any alterations can take place. No creation of new tokens can happen after the maximum supply has been achieved.
Many cryptocurrencies use maximum supply limits as essential elements of their system design. For example; Bitcoin establishes itself as the most famous cryptocurrency because it has a maximum supply limit of 21 million coins. The hard cap creates digital scarcity which prevents unlimited inflation from occurring. Other projects establish a maximum supply to inform users about the future token distribution.
Some cryptocurrencies establish maximum supply limits while others do not. Some networks permit continuous token creation through mining and staking rewards and inflationary model distributions. Supply growth in these situations occurs through emission rates which operate without a predetermined limit. Investors use maximum supply limits as a crucial factor to evaluate a project’s future value.
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The total supply and circulating supply of a cryptocurrency differ from its maximum supply. The total supply shows existing tokens, while the maximum supply establishes the total number of tokens that can ever exist.
On the other side, the circulating supply shows the number of tokens that remain active in the market at any particular moment. The separate definitions of these two terms help experts assess token economics through their distinct functions.
The crypto industry uses maximum supply in its reports to explain three main concepts about cryptocurrency value which include scarcity and inflation risk and asset evaluation. The concept helps clarify why certain assets maintain their value without losing worth through deflationary or dilution-resistant mechanisms. The maximum supply of a project helps readers understand how the project will develop its supply in the future while showing them the supply details that will cause price pressure over time.