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Maximum Market Supply

The maximum market supply is an indicator that shows us the maximum amount that a project or Cryptocurrency can generate. For example, Bitcoin is a Cryptocurrency with a supply limit or a Preset Maximum Supply, which corresponds to the amount of 21,000,000 units.

As we have seen in currencies such as Bitcoin, there is a maximum limit for the issuance of new units; but there are also other Cryptos for which there is no limit. This is due to the fact that, according to their characteristics, the emission of the new units is constant over time. In general, this type of tokens or Cryptocurrencies keep their price regulated by burning or destroying other Crypto assets to avoid devaluation in their price.

This supply indicator can sometimes be irrelevant as nowadays not all digital assets have a preset supply maximum. Sometimes when they do, you can change it for scalability policies in the project; Even so, it gives us a glimpse of the potential that a Cryptocurrency or token can have, assuming the idea that the market capital can rise if all the units have not yet been generated.

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When does a Cryptocurrency reach its maximum supply?

Continuing with the example of Bitcoin, which has a maximum limit of 21 million units, it is currently estimated that 90% of its entire supply has been mined, it has been on the market for more than 10 years and it is common to assume that within a few years to reach its maximum supply, but it doesn’t work that way.

According to experts in the study of Bitcoin mining, they estimate that around 2030 this Cryptocurrency will reach 99% of its maximum supply, but in order to reach 100% it is estimated that it would take approximately 100 more years to be able to mine the last bitcoin. This is due to the protocol or the very design of the Bitcoin Blockchain network. This is why in the market there are some Cryptocurrencies that have within their design a reward reduction system for each mined block, this system is called “Halving”.

This halving happens every 4 years where basically the reward miners receive for running the network is halved. For example, if normally miners are rewarded 6 BTC for mining after a halving, they will only receive 3 BTC for doing the same job. This was designed like this by Satoshi Nakamoto to prevent Bitcoin from being an inflationary currency and thus allow it to escalate in price while its supply decreases.

Despite the fact that there is the possibility of mining the last BTC, it will take many years to achieve it. Other Cryptocurrencies, on the contrary, with a similar protocol do not require as much time to complete the maximum supply, and the time will depend on the protocol they have and the future policies followed by the community of said Crypto.

Why are there Cryptocurrencies that will never have a maximum supply?

There are Cryptocurrencies that do not have a maximum supply because in their design they cannot be allowed, this is the case of Tether or the vast majority of stable currencies. Tether is a token that is anchored to a physical asset that is the US dollar; it does not establish a maximum supply since the creation of new tokens is variable and depends solely on the deposit of new dollars in a bank account. However, if all the dollars in the world are deposited in Tether, it would not make sense to have a supply limit since the dollar is a currency that can continue printing new units almost infinitely.

But this is not the only case, there are also Cryptos that are not anchored to any physical asset and even so do not have a maximum supply and that is that their system for creating new units depends on a complex algorithm that allows almost infinite creation. but controlled new units, but for this it is necessary first to burn or destroy existing units, to avoid uncontrolled issuance and this affects the price of the digital asset.

In a certain way, it could be said that yes, but there are different factors that limit the infinite issuance of some currency. In general, tokens have more issuance volume than Cryptocurrencies, but unlike Cryptocurrencies, some tokens are destroyed or burned to to keep its value under control, some others are generated by anchoring to a physical asset such as the dollar, which in theory could create as many tokens as desired.

According to the experts, following the mining protocol that Bitcoin currently presents and if the halving policies are not changed, it is estimated that the last bitcoin can be mined by the year 2140, which makes us think that perhaps our children or grandchildren can see this great event.

In theory this possibility can happen, let’s remember that Cryptocurrencies are projects that are managed and in constant development through the community of said Cryptocurrency, sometimes these communities vote to improve the protocol and can make important changes to the design of Cryptocurrency and Bitcoin is not exempt from this possibility.

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