What Is Max Supply?

Max supply is the best approximation of the maximum amount of coins that will ever exist in the lifetime of the cryptocurrency. Once the maximum supply is exhausted, no new coins or tokens will be produced or mined.

Usually, the maximum supply is determined by the limits outlined by each underlying protocol of every digital asset. In the case of Bitcoin, the maximum supply is fixed at 21 million coins. Not all cryptocurrencies have a predetermined fixed supply, and one of them is Ethereum.

Maximum supply is a different concept from total supply. Maximum supply is calculated by adding the total amount of coins that have been mined with those that are yet to be mined. In contrast, total supply is calculated by subtracting the number of coins that have been lost from the amount that have been mined.

Types of Maximum Supply in Crypto

There are different types of maximum supply:

1. Fixed max supply: It is the most common type and is implemented in most cryptocurrencies. It is a predetermined number of coins that can never be increased or decreased, regardless of demand. Bitcoin is an example.

2. Deflationary max supply: A deflationary maximum supply is one that is designed to decrease over time. This type of supply is usually implemented in cryptocurrencies to reduce the inflation rate and boost its scarcity. Ethereum hopes to become a deflationary max supply coin.

3. Dynamic max supply: A dynamic maximum supply is one that changes according to predetermined parameters, such as supply, demand and inflation. This type of supply is designed to be more flexible and adaptive to market conditions. 

No max supply: Some cryptocurrencies have no maximum supply, meaning that the number of coins can increase indefinitely. This type of supply is often seen in utility tokens, where the supply is not limited by the number of coins but by the number of users.