Is Coin Supply Misinterpreted in DeFi?
I came across this conundrum of coin supply awhile back and was really never able to find a concrete answer as to why. Even after reaching out to some pretty prominent crypto figures I’ve still yet to understand the mystery.
It all began as I was watching the video, IOTA explained in under 3 minutes!, and the narrator stated that Bitcoin and IOTA have fairly similar supplies but they’re just measured differently. This got my attention knowing that to my knowledge IOTA had a much bigger coin supply. The video continued on showing how both have nearly identical of their smallest unit: Satoshi and IOTA (2.1 quadrillion vs 2.7 quadrillion respectively). I paused the video and thought to myself, “if both have approximately 2 quadrillion of its smallest unit, then how does Bitcoin have 21 million coins verses 2.7 billion MIOTA?” The math just didn’t add up…
Then a light bulb went off. I realized at that very moment that nearly every crypto “wrapped” its smallest unit of measurement differently resulting in its particular coin supply. Kind of like wrapping pennies, nickels, dimes, and quarters when we were kids.
As you can see from chart above, both coins have a fairly similar smallest unit. Navigating down the chart we see that IOTA actually wraps less IOTAs into each of its native MIOTA coin (1 million IOTAs per MIOTA) as compared to Bitcoin which wraps 100 million Satoshis per Bitcoin. When adjusting IOTAs unit of measurement to match that of Bitcoin (like we learned to do in grade school) we see that IOTA should actually have a similar coin supply to Bitcoin (21mil vs 27mil respectively).
Why does this even matter?
Bitcoin’s rise to stardom has relied on the fact that it has a limited supply of coins and its perceived value and market cap relies on this.
Coin Price X Coin Supply = Market cap
So if websites like CoinMarketCap.com are reporting market cap figures for investors to consider for investment conclusions, don’t you think every coin should be measured using the same unit of measurement as Bitcoin? Meaning every coin should be adjusted using 100 million units per coin since Bitcoin is the coin to which every other crypto is measured against. Below is a spreadsheet I made in 2021 depicting some of the top coins listed on CoinMarketCap.com. It shows each coin reported coin supply and what that coin supply would look like if its unit of measure were adjusted to match that of Bitcoin.
As we see here shockingly many cryptos would have a much larger coin supply than the public is led on to believe and on the flip side many would have less coins making their fundamentals more attractive to investors. The supply of Ethereum for example would increase 10x while Terra would decrease 100x.
I wanted to write this article to stir up conversation and maybe even explanation. Is 1 Satoshi equivalent to 1 wen equivalent or to 1 IOTA? If so then adjustments need to be made. If not, then market cap can not be compared between cryptocurrencies like how it is today.
