Token Supply Models
monetary policy mechanism
Token supply models define how a digital asset is created, distributed, and managed over time. These models influence scarcity, inflation, deflation, and user behavior in blockchain ecosystems. By controlling total supply, issuance schedules, and burn mechanics, protocols can shape demand, price dynamics, and long-term utility. Supply models range from fixed caps (like Bitcoin), elastic supply (like algorithmic stablecoins), to emissions-based systems used in DeFi and gaming.
Use Case: A DeFi protocol launches a governance token with a maximum supply of 100 million. Each month, a fixed percentage is emitted to liquidity providers. Over time, the supply rate slows, encouraging early adoption and limiting inflation.
Key Concepts:
- Fixed Supply ÔÇö Maximum token cap (e.g., 21M BTC).
- Inflationary ÔÇö Continuous minting without a hard cap.
- Deflationary ÔÇö Tokens burned with each transaction or fee.
- Emissions Schedule ÔÇö Predictable token distribution timeline.
Summary: Token supply models are the programmable monetary policies of crypto ecosystems, determining how and when tokens enter circulation, how scarcity is engineered, and how economic incentives align over time.
| Model | Supply Type | Example Token | Impact |
|---|---|---|---|
| Fixed Cap | Max Supply Set | Bitcoin ($BTC) | Scarcity  Store of Value |
| Inflationary | No Cap | Dogecoin ($DOGE) | Constant Supply  Spending |
| Deflationary | Supply Decreases | Shiba Inu ($SHIB) | Burn  Value Preservation |
| Elastic Supply | Auto-Adjusting | Ampleforth ($AMPL) | Stability Targeting |