At Bitcoin's inception, Satoshi Nakamoto designed a mining algorithm that capped Bitcoin's supply at 21 million coins. In contrast, Ethereum (launched in 2014) initially used a similar mining validation method but lacks a supply limit. Cryptocurrencies thus fall into two categories: Limited Supply and Unlimited Supply.
Understanding Limited Supply in Crypto
Cryptocurrencies with limited supply have a fixed maximum issuance. For example, Bitcoin’s 21 million cap ensures no further minting once this threshold is reached. Key reasons for limited supply include:
Preserving Scarcity
Unlike fiat currencies, which central banks can print indefinitely, limited-supply crypto (like Bitcoin) is designed to appreciate in value by maintaining scarcity over time.
Algorithmic Requirements
Some cryptocurrencies, such as Bitcoin, implement algorithms (e.g., halving events) that mathematically enforce supply caps. Bitcoin’s logistic equation inherently limits its supply to 21 million.
Below are 7 cryptocurrencies with the smallest supplies, selected from top 200 projects by market cap (data as of September 28, 2022):
1. Yearn Finance (YFI)
- Role: Ethereum-based DeFi yield aggregator.
- Founder: Andre Cronje (also involved in Fantom).
- Supply Cap: 36,666 YFI.
- Price History: Peaked at $83,200/YFI (May 2021); currently ~$8,000. Ranked #107 by market cap.
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2. Maker (MKR)
- Role: Governance token for MakerDAO (issuer of DAI stablecoin).
- Supply Cap: 1,005,577 MKR.
- Price History: All-time high of $6,343 (May 2021); now ~$700. Ranked #59.
3. Compound (COMP)
- Role: Decentralized lending/borrowing protocol on Ethereum.
- Supply Cap: No fixed cap (current circulating supply: ~7.5M COMP).
- Price History: Peaked at $910 (May 2021); currently ~$60. Ranked #78.
4. Quant (QNT)
- Role: Blockchain interoperability and OS developer.
- Supply Cap: 14.6M QNT.
- Price History: Reached $430 (September 2021); now ~$140. Ranked #31.
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5. BTCST
- Role: Bitcoin mining hashpower token (BSC network).
- Supply Cap: 15M BTCST (after 1:10 redenomination).
- Price History: Peaked at $90 (October 2021); now ~$9. Ranked #175.
6. Aave (AAVE)
- Role: Decentralized lending protocol (rebranded from ETHLend).
- Supply Cap: 16M AAVE.
- Price History: All-time high of $670 (May 2021); currently ~$75. Ranked #47.
7. Dash (DASH)
- Role: Privacy-focused payment coin (Litecoin fork).
- Supply Cap: 18.9M DASH.
- Price History: Peaked at $1,570 (December 2017); now ~$40. Ranked #76.
FAQs
Q: Why do limited-supply cryptos often appreciate in value?
A: Scarcity drives demand, similar to precious metals like gold.
Q: Can unlimited-supply cryptos be deflationary?
A: Yes, if mechanisms like token burns reduce supply over time.
Q: Is Bitcoin’s 21M cap absolute?
A: Yes, enforced by its code. Even if lost, unrecoverable coins remain part of the cap.
Conclusion
Limited-supply cryptocurrencies offer long-term scarcity advantages, but price appreciation also depends on project innovation and adoption. Always research beyond supply metrics when evaluating crypto assets.