What is a Hard Cap?
A hard cap, also known as a maximum supply or max supply, is a predetermined limit on the amount of cryptocurrency that can exist in a given blockchain network. It is set at the time of launch and cannot be changed later. A hard cap usually exists to protect against inflation and devaluation of tokens due to over-issuance.
Why Would You Use Hard Caps?
Hard caps are used for two main reasons in cryptocurrency networks:
1) To provide an upper limit for how much value can exist within the network (to maintain stability).
2) To incentivize early adopters by creating scarcity – meaning there will only be so many coins available no matter what happens with demand. This allows investors to potential benefit from price appreciation if demand increases beyond expectations.
How Is It Different from Soft Caps?
A soft cap is similar to a hard cap but it provides more flexibility. The difference between them lies in its ability to change after being initially set – although this change requires approval by stakeholders who have governance rights over the system (such as miners & developers). A higher soft cap means more tokens could potentially be created while still providing some kind of upper limit on total number issued, while allowing additional funds raised through token sales etc..
