Understanding Circulating Supply in Cryptocurrency
Circulating supply refers to the current amount of cryptocurrency coins or tokens actively circulating at any given time.
This value is not fixed and can vary as new coins are minted or existing coins are removed from circulation.
Mining, Minting, Burning, and Unintended Losses
If a cryptocurrency is mineable, new coins can be gradually created through mining.
In the case of a centralized token, the supply can be increased at the developers’ discretion through instant minting.
The supply can also decrease intentionally through burning, where coins are deliberately destroyed or rendered unusable.
Additionally, supply can reduce unintentionally due to accidents such as sending coins to an unrecoverable address or losing access to a wallet containing funds.
Supply Metrics
It is important to note that the network as a whole does not have precise knowledge of the exact amount of the total supply that is actively circulating, making the metric of circulating supply an imperfect approximation.
It is essential to differentiate the circulating supply from the total supply, representing the total number of coins mined thus far, excluding any intentionally burned coins.
Additionally, maximum supply refers to the hard-coded limit that neither the total nor circulating supply can exceed.