Max Supply
Max supply is the largest number of coins or tokens that can exist under a cryptocurrency’s rules. Not every cryptocurrency has a fixed maximum.
What is max supply?
A cryptocurrency’s rules can set a maximum limit on how many new units can be added. These rules may be written into the blockchain or a smart contract. A smart contract is a program that automatically carries out agreed-upon rules.
Max supply is not the same as total supply. Total supply is usually the number of units that have been issued, minus any units that have been permanently destroyed. Circulating supply is the number of units considered to be in circulation under the measurement method being used. Locked or reserved tokens may not be included.
An example of max supply
Say a token has a max supply of 100 million tokens. So far, 60 million tokens have been issued. Under these rules, up to 40 million more tokens can be added.
Under the current rules, Bitcoin has a maximum supply of about 21 million bitcoin. New bitcoin are gradually issued as rewards to miners.
Why is max supply important in crypto?
Max supply shows how many more tokens can still be issued in the future. If new tokens are added, existing holders may own a smaller share of the total supply.
You’ll often see the term in discussions about tokenomics: the rules for issuing, distributing, and destroying tokens. Max supply also comes up with Fully Diluted Valuation, or FDV. This is calculated by multiplying the price per token by the maximum supply. It’s just a calculation, not a prediction of future value.
A fixed maximum doesn’t automatically mean a crypto’s price will rise. Demand, usefulness, and other factors also play a role. A stated maximum may not always be unchangeable, either: that depends on the design and on how changes to the rules are approved.
