Crypto Terms: Letter H

What is Hard Cap?

Hard Cap - the absolute maximum supply limit of a particular cryptocurrency.
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Let's find out Hard Cap meaning, definition in crypto, what is Hard Cap, and all other detailed facts.

A hard cap is the absolute maximum supply limit of a particular cryptocurrency placed by the blockchain’s code. A hard cap prevents the further circulation and creation of its units. This way it creates scarcity which drives up the value of each token. This limit can be bypassed by changing the parameters of a cryptocurrency which eventually results in the creation of a new cryptocurrency.

A hard cap is strictly supervised by crypto analytics websites and the communities of specific projects. However, it can be changed when an error occurs in the code, a malicious action happens or when the developers need to change it for some specific situations. One of the bigger hard cap breaches occurred in Bitcoin when the 184M inflation bug appeared in code and broke the 21M limit.

As mentioned before, hard caps help to raise the value of tokens. A great example of that would be when the MEME token (created as a satire in DeFi and NFT industry) exploded in value thanks to its small hard cap of only 28,000 tokens. Also, in 2020, the YFI governance token raised its value to over $40,000 mostly thanks to its small hard cap of 30,000 tokens.