Definition of Total Supply
Total supply refers to the maximum number of tokens or coins that will ever be created as part of a cryptocurrency project. It indicates the total quantity of tokens that can potentially exist in the market. The total supply is predetermined and set within the project’s code or smart contract.
What’s Included in the Total Supply
The total supply includes all tokens that have been or will be created as part of the project. This encompasses tokens that are currently in circulation, as well as those that may be held in wallets, exchanges, or locked in smart contracts. The total supply accounts for all tokens that have been generated since the inception of the project.
Market Impact and Lockups
The total supply plays a crucial role in market dynamics, particularly when considering locked coins. Some cryptocurrency projects intentionally withhold a portion of the total supply to create scarcity and potentially increase the value of the token. These intentionally locked coins can have an impact on market price and trading volume.
Additionally, there may be coins locked in smart contracts, either for a predetermined period or as part of an initial coin offering (ICO) stage. For example, during an ICO, a portion of the total supply may be sold to investors, while another portion is locked up to be distributed gradually over time. The release of these locked coins can influence market dynamics by increasing the circulating supply and potentially impacting token prices.
Differences between Circulating and Total Supply
Circulating supply and total supply are two distinct concepts in the cryptocurrency market. Circulating supply pertains to the quantity of coins or tokens that are presently in active circulation and available for trading or public use. It excludes any coins that have not yet been generated or are intentionally locked.
In contrast, total supply includes all tokens that have been created or will be created in the future. It encompasses both circulating coins and any locked or reserved coins. Calculating market capitalization, a key metric for evaluating a cryptocurrency’s value, is often done using circulating supply rather than total supply, as it reflects the practical value and market activity of the token.
Case of Bitcoin
Bitcoin has an interesting case when it comes to total supply. It has a predetermined maximum supply of 21 million Bitcoins that will ever be created, with just over 19,46 million already in existence. This limit is set within the code and cannot be changed without a hard fork.
The management of Bitcoin’s total supply is decentralized and community-driven, with no central authority controlling the issuance of new coins. This creates a sense of scarcity and value for the cryptocurrency as investors view it as a limited resource.