The major innovation of blockchain technology is that it provides an authoritative, immutable and transparent record of transactions and data and is most commonly used to record ownership of units of cryptocurrency.

Understanding a cryptocurrency’s supply – how many coins percolate around an economy – is crucial for determining metrics like supply, demand and market capitalization. Indeed, one of the reasons that coins like bitcoin (BTC) – the native cryptocurrency of the Bitcoin network – are worth anything at all is that you know precisely how many of them are in circulation at any given moment.

However, things get slightly confusing when wading a little deeper. The circulating supply is not the same as the maximum or total supply, and distinguishing between the three terms is critical to understanding the size of a cryptocurrency’s economy.

A cryptocurrency’s circulating supply defines how many units of that cryptocurrency are swirling around the market at any one time. As of this writing, there are around 18.98 million BTC, 120 million ethereum (ETH) and 81 billion tether (USDT) coins in circulation, for example.

Note that circulating supply does not refer to all of the units of that cryptocurrency that you can buy on a crypto exchange – just the cryptocurrency that’s out there on the blockchain today and can be freely sent between wallets.

For instance, Satoshi Nakamoto, the creator of Bitcoin, controls billions of dollars worth of Bitcoin, but hasn’t touched them in over a decade. Nevertheless, these Bitcoins are still considered to be part of Bitcoin’s circulating supply.

This consideration has caused some analysts to dismiss one of the most commonly referred to metrics that define a crypto economy’s size: market capitalization.

The market cap of a coin is a very crude multiplication of all the coins in existence by the price, even if many of those coins are lost, sequestered by the FBI or owned by the deceased. One metric, known as the realized market cap, tries to get around this issue by only counting recently moved coins in its calculation.

A cryptocurrency’s total supply is the total number of tokens that exist on the blockchain, including tokens that aren’t in public circulation.

When a cryptocurrency project launches a new token or coin, they might create lots more crypto than they distribute at that moment.

For instance, coins earmarked for staking rewards – those given to people who lock up tokens within a protocol – might technically “exist” on the blockchain, but you might not be able to start earning them until a certain condition has been met or date has been passed.

That’s to say, they’re minted, but they’ve never hit anyone’s wallet and aren’t in circulation. They might have been created following a “premine” – when a developer mines lots of coins before launching the blockchain, but doesn’t distribute them to anyone – or could be subject to a vesting period.

The total supply doesn’t include coins that have been burned. This refers to tokens that have been permanently removed from circulation by being sent to a wallet to which nobody has the key.

The maximum supply of a coin or token refers to the total number of coins that can ever be minted. Bitcoin’s maximum supply is capped at 21 million. Due to a feature built in to Bitcoin’s code, once the number of coins in circulation reaches 21 million, no more can ever be “mined” – generated as a reward for discovering new Bitcoin blocks.

Read more: How Does Bitcoin Mining Work?

Some coins do not have maximum supplies. Ethereum is one such example; right now, there is no upper limit on how many ETH can exist, although only roughly 18 million ETH can be minted each year based on the current block discovery times and rewards.

The supply of some cryptocurrencies fluctuates, making maximum supplies hard to quantify. LUNA, for instance, is created and burned to keep the price of UST, a US dollar-pegged stablecoin issued on the Terra ecosystem, equal to $1. While Ethereum now burns a portion of coins sent as a transaction fee instead of handing it all to miners, following the implementation of EIP-1559 in August 2021.

It’s difficult to say whether total, circulating or maximum supply is the most important – each has its own use. However, knowing the differences among them can help you wade through the crypto market and understand how they can influence the price of a coin.

One key metric is the fully diluted market cap – a multiplication of a token’s maximum supply by its current price. It includes vested tokens and can provide hints that some market actors, like early investors or the project’s team, could sell a whole lot of tokens on the open market once they have access to the coin.

Read more: Investing in Crypto: Alternatives to Bitcoin and Ether