Supply Cap Constraints

Supply cap constraints refer to the hard limit on the total number of tokens that can ever exist within a specific blockchain network. This limit is usually enforced by the protocol's code and is designed to mimic the scarcity of assets like gold.

A fixed supply cap ensures that the token cannot be diluted indefinitely, providing a predictable long-term supply outlook for investors. This constraint is a powerful narrative tool and an economic feature that drives value accrual.

Protocols with supply caps must manage their security budget carefully, as they cannot rely on infinite inflation to pay validators. This forces the protocol to develop sustainable revenue models, such as transaction fees, to secure the network in the long run.