What Is the Difference between a Capped Supply and an Uncapped Supply Token Model?
A capped supply model, like Bitcoin's 21 million limit, has a fixed, finite maximum number of tokens that will ever exist, ensuring long-term scarcity. An uncapped supply model, like Ethereum's pre-Merge design, has no theoretical limit, meaning new tokens can be continuously minted, potentially leading to inflation.
The choice of model significantly impacts long-term scarcity and intrinsic value.
Glossar
Supply
Allocation ⎊ Supply, within cryptocurrency and derivatives, fundamentally represents the distribution of an asset ⎊ whether a token, option contract, or synthetic derivative ⎊ across available market participants.
Uncapped Supply
Supply ⎊ The concept of an "Uncapped Supply" within cryptocurrency, options, and derivatives signifies a theoretical absence of a predetermined maximum quantity.
Capped Supply
Scarcity ⎊ Capped supply, within cryptocurrency and derivative markets, denotes a predetermined maximum number of units that will ever exist for a given asset, fundamentally influencing its potential value proposition.