Definition
A supply cap is a predefined upper limit on how many units of a cryptocurrency or token can ever be created. It is usually encoded in the project’s smart contract or protocol rules and cannot be exceeded without a fundamental change to those rules. By fixing the total possible supply, a supply cap shapes the long-term tokenomics and scarcity profile of the asset.
In many decentralized finance (DeFi) systems, the supply cap interacts with mechanisms such as mint and burn to control how close the circulating supply gets to that maximum. Some assets have a hard supply cap that is never intended to change, while others may allow governance processes to adjust it. The existence or absence of a supply cap is a core design choice that influences how a token behaves over time.
Context and Usage
Within tokenomics, the supply cap defines the ceiling for total issuance, while the actual circulating amount may be lower due to gradual mint schedules or periodic burn events. In systems that use halving or similar emission reductions, the supply approaches the cap more slowly as new issuance decreases over time. This creates a predictable path for how the total supply evolves within the fixed limit.
DeFi protocols often reference the supply cap when describing their token’s economic model, governance rights, or incentive structures. The cap can apply to native protocol tokens, governance tokens, or other on-chain assets that follow a defined issuance policy. Understanding the supply cap helps clarify how a token’s quantity is constrained relative to its long-term design.