What is supply?
In finance and economics, supply refers to the total amount of a particular good or service that is available in the market. It refers to the quantity of a product that producers are willing to sell at a certain price over a certain period of time. The supply of a product can be influenced by various factors such as production costs, technological advancements, availability of raw materials, and government policies. The relationship between supply and demand determines the price of a product in a free market economy. When the supply of a product increases relative to demand, the price tends to decrease, and vice versa.
How is the supply of cryptocurrency determined?
The supply of a cryptocurrency is determined by the rules of its protocol. In most cases, the supply is limited and predetermined at the launch of the cryptocurrency. For example, Bitcoin has a fixed maximum supply of 21 million coins, and this number will never change. Other cryptocurrencies may have different supply mechanisms, such as a fixed annual inflation rate or a dynamically adjusting supply based on certain parameters.
The supply of a cryptocurrency can also be affected by factors such as token burns or token minting. A token burn involves destroying a certain number of tokens, reducing the overall supply of the cryptocurrency. Token minting, on the other hand, involves creating new tokens and adding them to the overall supply.
In summary, the supply of a cryptocurrency is determined by the rules set forth in its protocol and can be affected by various factors such as token burns and minting.
What is a circulating supply?
Circulating supply refers to the total number of coins or tokens of a particular cryptocurrency that is available for trading in the market. It is the amount of a cryptocurrency that is currently in circulation and available to the public. Circulating supply does not include coins or tokens that are locked or reserved for use by the project team, developers, or other stakeholders. The circulating supply of a cryptocurrency is important because it affects its market capitalization and price, as the price of a cryptocurrency is often calculated based on its circulating supply.
What is a total supply?
In the context of cryptocurrency, the total supply refers to the maximum number of tokens or coins that can exist within a particular blockchain protocol. This number is typically established at the time of creation and is often programmed into the underlying code of the protocol, making it unalterable without a hard fork.
The total supply can be thought of as the upper limit on the number of tokens that can ever be created. This number is important because it can influence the perceived scarcity of a cryptocurrency, which in turn can affect its value on the market. For example, a cryptocurrency with a very high total supply may be perceived as less valuable than one with a lower total supply, all other things being equal.
It's important to note that the total supply is not necessarily the same as the circulating supply or the current supply of a cryptocurrency. The circulating supply is the number of tokens that are actually in circulation and available for trading on the open market, while the current supply refers to the total supply minus any tokens that have been burned or destroyed.
What is a locked supply?
A locked supply refers to the portion of a cryptocurrency's total supply that is not available for trading or transfer. This can include tokens that are locked up in smart contracts or held in reserve for specific purposes, such as funding development or rewarding stakeholders. A locked supply can affect the circulating supply of a cryptocurrency and therefore impact its market value.