When Satoshi Nakamoto delivered Bitcoin in 2009, he intended to establish a new foundation of money as a form of payment that doesn’t require control from any entity. At the same time, he intentionally limited the cryptocurrency’s coin supply to 21 million so that the scarcity would lead to more demand in time and, therefore, better prices.
Since then, the crypto market has boomed, and developers have created unique types of coins with distinct coin supplies that would help pursue their best features. Some crypto projects, such as Dogecoin, also started as a joke but became valuable due to market demand and media coverage.
Being one of the coins with unlimited coin supply, it may be challenging to make a Dogecoin price prediction, given the supply-demand relationship.
However, this feature didn’t stand in the way of its fame, especially not when Elon Musk tweeted about it or when its value boomed as a result of the post-election rally. So, what’s so special about cryptocurrencies with an unlimited coin supply?
How Exactly Does Coin Supply Influence Price?
When developing a cryptocurrency, the developing team behind it assesses the coin supply based on the expected future increase rate. Usually, this rate speeds up in the cryptocurrency’s early years and slows down over time. There are three important categories of supply:
- The circulating supply represents the number of coins available on the market;
- The total supply includes the coins in existence, but not all are circulating;
- The maximum supply is the finite number of coins to be ever created;
Coins with unlimited coin supply still have data on the circulating supply on the market, and their white paper includes predefined rules on the number of coins released yearly so their prices can be predicted. Let’s talk about them.
Ethereum Has an Annual Issuance Rate
Ethereum is the second most popular crypto and the largest by market capitalization after Bitcoin. Its best features include smart contract functionality and an extensive library of tools developers use to create NFTs and decentralized ecosystems.
Although its supply is limited, Ethereum has a fixed annual rate of issuing coins of 18 million Ether. Still, this might change in the future since Ethereum’s consensus mechanism has shifted from proof of work to proof of stake.
Therefore, people no longer have to mine Ethereum to contribute to coin issuance but stake it, which is a more efficient and sustainable method.
This was part of the Merge update, but the following one, the Dencun update, made Ethereum inflationary, which encouraged spending since the supply has increased.
Dogecoin Has an Uncapped Total Supply
Dogecoin started as a joke since the team behind it was inspired by the Doge meme. In the early beginning, cryptocurrency was popular only among members of the meme community, but it became popular when Elon Musk tweeted about it, which boosted its price overnight.
However, Dogecoin has an unlimited coin supply and no cap on mining or creation. This is because the creators viewed it as a fun way to invest in cryptocurrency rather than a competitive asset. However, the project developed a unique coin-burning method to ensure its inflationary features.
The mechanism aims to reduce coins from the total supply and increase their value. Therefore, the platform transfers coins to a burning address, from which Doge coins cannot be retrieved.
USD Coin is Backed by the US Dollar
The USD coin is one of the numerous crypto projects whose value is linked to fiat money. They are called stablecoins, and their purpose is to make them less volatile than regular crypto coins. USD coin is one of them, and it has an unlimited supply, so users can mint and redeem the coins at any time.
The stablecoin is powered by the Ethereum blockchain, so it provides high efficiency, safety, and a stable price. Many investors prefer stablecoins to regular cryptocurrencies because their price changes are not that dramatic.
The regulated financial institution behind the USD coin contributed to the coin’s circulation by backing it with $1 held in reserve, so the relationship between the coin and the dollar is 1:1.
DAI is a Product of Open-source Software
Maker Protocol, a technology based on the Ethereum blockchain and backed by the US dollar, uses DAI cryptocurrency for the Make Protocol community. Still, its use cases expand to so much more. For example, people contribute to the creation of more tokens by locking up different cryptocurrencies in the networks, including ETH and USDC.
Like the latter, DAI provides a reliable and resilient method for payments in the world of volatile cryptocurrencies, so people can easily leverage it for savings and lending. The technology behind it allows users to collateralize crypto to generate DAI as loans.
Most people move their portfolio value towards DAI to reduce their exposure to risky markets. Leveraging it means less transaction costs and delays since it’s backed by blockchain. Moreover, it’s a great method for accessing loans without going through the regular credit process.
Pros and Cons of Unlimited Coin Supply
Coins with an unlimited supply are great because they offer opportunities for wider adoption. Since there’s no limited supply cap, users and developers are not limited by scarcity and high prices. At the same time, these coins have more inflationary control, meaning they can ensure price stability due to their monetary policies.
On the other hand, having an unlimited supply comes with the risk of inflation. Continuously creating new coins can affect the value of the cryptocurrency. Plus, the lack of scarcity leads to lower investment potential than coins with a limited supply.
What Do You Think About Coins with Unlimited Coin Supply?
The cryptocurrency market has expanded considerably in the past years, allowing developers to create unique projects and experiment with different technologies and concepts.
One of these ideas leads to the creation of coins with unlimited supply, such as Ethereum, to encourage the predictability rate in relation to the market demand. Dogecoin, USD coin, and DAI also have unlimited coin supply, and their use cases are diverse.
