Do Utility Tokens Have a Cap on Supply?
Utility tokens, often used within specific ecosystems, serve various functions such as accessing services, voting, or paying transaction fees. One common question is whether these tokens have a capped supply or not.
Generally, the supply of utility tokens can vary greatly depending on the project. Some utility tokens are capped, meaning there is a maximum number of tokens that will ever be created. This is often done to create scarcity and potentially increase the token's value over time, similar to how Bitcoin has a cap of 21 million coins.
On the other hand, many utility tokens do not have a fixed supply. These projects may choose to implement a dynamic supply model, allowing for token minting or burning as the demand for services fluctuates. This can make the token more flexible and align with the growth of the ecosystem it supports.
It’s essential for investors to read the whitepaper of a utility token to understand its supply mechanics. By doing so, they can make informed decisions regarding the token's potential value and utility within its respective ecosystem.
In summary, utility tokens can either have a capped supply or be unlimited, and the specifics will depend on the individual project and its goals.