What Is a ‘Hard Cap’ in Cryptocurrency Terms?
A 'hard cap' refers to the absolute, fixed maximum number of coins that will ever be created or exist for a specific cryptocurrency, such as Bitcoin's 21 million limit. This limit is embedded in the protocol's code and cannot be changed without a hard fork that gains consensus from the majority of the network.
The hard cap is a fundamental feature of the monetary policy, ensuring scarcity and preventing inflationary supply.
Glossar
Hard Fork Impact
Disruption ⎊ A hard fork represents a fundamental divergence in a cryptocurrency’s blockchain, creating a new version with altered rules; this event introduces systemic risk to derivative valuations predicated on the original chain’s continued functionality, necessitating immediate recalibration of pricing models.
Bitcoin Hard Fork Risk
Network Partition ⎊ Bitcoin Hard Fork Risk materializes when a significant portion of the network adopts a software change incompatible with the existing consensus rules, potentially leading to a chain split and asset duplication.
Hard Capped Supply
Constraint ⎊ Hard Capped Supply refers to the absolute, unchangeable maximum limit on the total number of cryptocurrency units that can ever be created, as defined by the underlying protocol's code.
Intrinsic Value Cap
Floor ⎊ The minimum theoretical price for any in-the-money call option is its intrinsic component, representing the immediate profit upon exercise.
Hard Governance Attack
Governance ⎊ A hard governance attack within cryptocurrency, options, and derivatives contexts represents a coordinated effort to manipulate on-chain or off-chain governance mechanisms to achieve a predetermined, often self-serving, outcome.
Network Hard Fork
Divergence ⎊ A Network Hard Fork represents a permanent divergence in a blockchain's protocol rules, resulting in two separate, incompatible chains.
Hard Rug Pull Scenario
Exploit ⎊ A hard rug pull scenario describes a malicious exploit where project developers or insiders drain all liquidity from a decentralized exchange (DEX) liquidity pool.
Hard Fork Index Price Effect
Event ⎊ A hard fork represents a fundamental protocol change that introduces significant uncertainty regarding the future asset structure and valuation of the underlying cryptocurrency.
Economic Tradeoffs of Hard Pegs
Constraint ⎊ Hard pegs in cryptocurrency, particularly when applied to stablecoins or cross-chain protocols, introduce a fundamental constraint on monetary policy and independent valuation.
Hard Asset Valuation
Model ⎊ Hard asset valuation involves determining the intrinsic and market value of tangible, physical commodities like gold, real estate, or industrial metals.