In general, ‘supply’ indicates the quantity or amount of something available for use. In finances (including cryptocurrencies), it refers to the total amount of a particular asset, like a coin, that is available or will ever be available in the market. Commonly, fiat currencies have unlimited supplies, while cryptocurrencies often come with limited supplies. That’s more important than it looks like.

The supply of most cryptocurrencies is decided (and designed) by their developers from the beginning, while central banks determine the supply of national currencies. They can decide to print new money whenever they deem it convenient, while cryptocurrencies stick with their limited number of units, usually, forever. GBYTE, the native currency of the Obyte Network, also has a fixed total supply to take advantage of the benefits that this brings.

Why is supply important in crypto?

In case you didn’t know, scarcity in an asset implies a higher value in the market. The scarcer it is, the more valuable an asset is. That’s why total supply is important: scarcity can make the coins more valuable, much like how rare collectibles or precious metals are valued. People often see cryptocurrencies with a capped supply, like BTC or GBYTE, as a good store of value because they can't be diluted by creating more coins.

In contrast, fiat currencies like the US dollar have an unlimited supply and this could cause some issues for all its users.

While this flexibility allows governments to manage economic stability and address financial crises, it can also lead to inflation. Inflation happens when there’s too much money chasing too few goods, causing prices to rise and reducing the currency’s purchasing power.

Cryptocurrencies with a fixed supply aim to avoid this issue by preventing the endless creation of new coins, thereby preserving their value over time. This doesn’t mean that all of them are stablecoins, but in the volatile whims of the free market, a fixed supply can bring a degree of stability in the long term, like the nearly fixed supply of gold provided long-term stability of prices in the age of gold standard.

GBYTE vs Other Coins

Let there be light! That’s the sentence accompanying the genesis unit (first-ever unit) of the Obyte Network, from where the total supply of GBYTE came to exist at once —exactly 1 million GBYTE or 1015 Bytes. This happened in December 2016, and so far 85% of all those GBYTEs have been distributed through different programs, grants, and rewards.

Other networks offer different supply and distribution models. For instance, Bitcoin has a capped supply of 21 million coins, which means there will never be more than that in existence. In contrast, Ether doesn’t have a hard cap on its total supply. While the issuance of new Ether has been limited to 1,600 ETH per day since The Merge, the absence of a maximum supply means that new Ether can continue to be created indefinitely, and the practice of frequent hard forks that change the rules (including monetary rules) means that the long-term trajectory of Ether supply cannot be predicted.

Unlike them, where new coins are created along the way and claimed first by miners or “validators”, Obyte has avoided these mechanisms to preserve a higher level of decentralization. Instead of middlemen creating new coins and approving or rejecting transactions, Obyte works with an Acyclic Directed Graph (DAG) structure where every user is its own “miner”, and the only one in charge to approve their own transactions —just by sending them into the DAG.

Each of these supply models offers different advantages. Bitcoin’s capped supply (slowly and predictably growing for the next 100 years) appeals to those who value scarcity and some level of predictability. Ether’s flexible supply could allow ongoing network incentives and development funding. Obyte’s model, with its own scarcity, one-time issuance, and DAG structure, aims to maintain long-term value (like Bitcoin) and a greater degree of user control (like nothing else).

Which model is better? Likely, only time will tell, or the three of them have their own appeal. Meanwhile, you can decide what advantage is better for you to enjoy. If you’re looking for a higher decentralization, then Obyte is your choice!

Featured Vector Image by stockgiu / Freepik