Centher Academy
What is Total Supply?
Tokens, in the context of cryptocurrencies and blockchain technology, can have different total supply models, which affect their scarcity, value, and utility.
Here are a few common types of token supply
Fixed Supply
Some tokens have a fixed supply, meaning that the total number of tokens that will ever exist is predetermined and cannot be changed. Bitcoin, for example, has a fixed supply of 21 million coins. This limited supply is designed to create scarcity and potentially increase value over time.
Inflationary Supply
Inflationary tokens have a mechanism that continuously adds new tokens to the supply over time. These additional tokens can be used to reward network participants, incentivize certain behaviors, or maintain the network's operations. An example of this is the "proof-of-stake" model, where new tokens are minted and distributed to validators as rewards.
Deflationary Supply
Deflationary Supply: In contrast to inflationary tokens, deflationary tokens decrease their supply over time. This can be achieved through mechanisms like token burning, where tokens are intentionally destroyed or removed from circulation. The goal is often to increase scarcity and potentially enhance the token's value.
Dynamic Supply
Some tokens have a dynamic supply model that adjusts based on certain conditions. For instance, the supply might increase during periods of high demand or decrease during periods of low demand.
Capped Supply
Tokens with a capped supply have a maximum limit to the number of tokens that can be created. This limit is set to ensure a balance between scarcity and utility.
It's important to research and understand the tokenomics of a specific cryptocurrency to know its total supply model and how it might impact its value and utility over time. The total supply of a token is a fundamental aspect of its design and can play a significant role in its adoption and use within its associated blockchain ecosystem.