Tokenomics & Markets

1. The total quantity of a cryptocurrency's tokens or coins that are publicly available and actively circulating in the open market at a given point in time. Circulating supply excludes tokens that are locked (in vesting contracts, staking protocols, or time-locks), reserved (held by the founding team, treasury, or foundation), or burned (permanently removed from circulation). It represents the actual liquid float available for trading.

2. Circulating supply is the primary input for calculating a token's market capitalization: Market Cap = Circulating Supply × Current Price. It is distinct from Total Supply (all tokens in existence, including locked) and Maximum Supply (the hard cap on tokens that will ever exist). Bitcoin's circulating supply as of 2025 is approximately 19.7 million BTC against a maximum supply of 21 million.

See also: Market Capitalization · Fully Diluted Valuation · Token Vesting

1. The theoretical total market capitalization of a cryptocurrency project if its entire maximum token supply were in circulation at the current market price. Calculated as: FDV = Maximum Supply × Current Price. FDV represents the upper bound of a project's implied valuation, assuming all tokens — including those locked, unvested, or yet to be minted — were immediately liquid and valued at the current spot price.

2. The ratio of Market Cap to FDV is a critical metric for evaluating token inflation risk. A low Market Cap/FDV ratio (e.g., 5–15%) indicates that the vast majority of tokens are not yet in circulation — meaning significant future sell pressure from vesting unlocks, team allocations, and ecosystem rewards is anticipated. Projects launching with a very low circulating supply relative to FDV are sometimes characterized as "high FDV, low float" launches — a structure that has drawn regulatory and community scrutiny.

See also: Circulating Supply · Market Capitalization · Token Vesting

1. A smart contract-based reserve of two or more tokens locked by liquidity providers (LPs) to facilitate decentralized trading on an Automated Market Maker (AMM) protocol. Unlike traditional order book exchanges that match buyers with sellers, AMM liquidity pools use algorithmic pricing formulas — most commonly the constant product formula (x × y = k, pioneered by Uniswap) — to determine exchange rates based on the ratio of tokens in the pool.

2. Liquidity providers deposit equal values of two tokens into a pool and receive LP tokens representing their proportional share of the pool. In return, they earn a percentage of trading fees generated by the pool (typically 0.05%–1% per swap, depending on the protocol and fee tier). LPs are exposed to impermanent loss — a divergence loss that occurs when the price ratio of the pooled tokens changes relative to when they were deposited.

See also: Yield Farming · Rug Pull · Automated Market Maker

1. The total market value of a cryptocurrency's circulating supply, calculated as: Market Cap = Circulating Supply × Current Market Price. Market capitalization is the most widely used metric for ranking and comparing the relative size of cryptocurrency projects. As of 2025, Bitcoin's market cap exceeds $1.3 trillion, representing approximately 50–55% of total cryptocurrency market capitalization — a dominance metric tracked as "Bitcoin Dominance" or "BTC.D."

2. Market cap classifications in cryptocurrency follow informal but widely recognized tiers: Large-cap (>$10B) — established networks with significant liquidity and institutional adoption; Mid-cap ($1B–$10B) — growing protocols with proven utility; Small-cap ($100M–$1B) — emerging projects with higher risk/reward profiles; Micro-cap (<$100M) — speculative assets with limited liquidity and elevated manipulation risk.

See also: Circulating Supply · Fully Diluted Valuation · Token Velocity

1. The absolute upper limit on the total number of tokens or coins that will ever exist for a given cryptocurrency, as defined by its protocol rules or smart contract code. The maximum supply represents a hard monetary cap that cannot be exceeded without a fundamental protocol change requiring network consensus. Bitcoin's maximum supply of 21,000,000 BTC is its most cited monetary property — enforced by the halving schedule that reduces block rewards approximately every four years until the final satoshi is mined around the year 2140.

2. Not all cryptocurrencies have a defined maximum supply. Ethereum, following its transition to Proof of Stake and the implementation of EIP-1559 fee burning, operates with a theoretically uncapped but deflationary supply — where burn rates can exceed issuance during periods of high network activity, making ETH net deflationary. Tokens without a maximum supply require careful analysis of issuance schedules and burn mechanisms to assess long-term inflation risk.

See also: Circulating Supply · Fully Diluted Valuation · Halving

1. A contractual or smart contract-enforced schedule that restricts the transfer or sale of allocated tokens until specified time or milestone conditions are met. Token vesting is the primary mechanism used to align the long-term incentives of founders, team members, investors, and advisors with the project's success — preventing immediate token dumps that would devastate price and community trust immediately following a token generation event (TGE).

2. Common vesting structures include: Cliff vesting — no tokens released until a defined cliff period (typically 6–12 months), after which a lump sum unlocks; Linear vesting — tokens released continuously over a defined period (e.g., 1/36th per month over 3 years); Milestone vesting — tokens released upon achievement of specific protocol or business milestones. Industry standard for reputable projects is a 1-year cliff followed by 2–3 years of linear vesting for team and investor allocations.

See also: Circulating Supply · Fully Diluted Valuation · Rug Pull

1. A measure of how frequently a token changes hands within a given time period, adapted from the classical monetary economics equation of exchange: MV = PQ, where M = money supply, V = velocity, P = price level, and Q = quantity of goods/services transacted. High token velocity — where tokens are acquired and immediately sold rather than held — is generally associated with lower token valuations, as it implies the token functions as a medium of exchange rather than a store of value.

2. Token velocity is a critical but often overlooked variable in cryptocurrency valuation models. A token with high utility but high velocity (e.g., a payment token used to pay fees and immediately sold by recipients) may struggle to appreciate in value despite genuine network usage. Protocol designers use velocity sinks — mechanisms that incentivize holding — to reduce velocity: staking rewards, governance rights, fee discounts for holders, and burn mechanisms.

See also: Market Capitalization · Circulating Supply · Store of Value

1. A DeFi strategy in which cryptocurrency holders deploy their assets across one or more protocols to generate returns — typically in the form of trading fees, interest, and governance token rewards. Yield farmers actively move capital between protocols to maximize their Annual Percentage Yield (APY), often compounding rewards by reinvesting earned tokens back into yield-generating positions. The practice was popularized during the "DeFi Summer" of 2020, triggered by Compound Finance's launch of COMP token liquidity mining rewards.

2. Yield farming returns are generated from multiple sources: Trading fees from AMM liquidity provision; Lending interest from supplying assets to money markets (Aave, Compound); Liquidity mining rewards — protocol governance tokens distributed to incentivize liquidity; Leveraged yield strategies — borrowing against deposited collateral to amplify positions. Advertised APYs can range from single digits to thousands of percent, with higher yields invariably accompanied by proportionally higher risks.

See also: Liquidity Pool · The Vault — Terra/LUNA Post-Mortem · Smart Contract