In this article, we want to provide you with information about hard Cap in all types of digital currencies and examine different applications of hard Cap. Well, let’s examine the importance of using Hard Cap to be knowledgeable in this area and familiar with this concept. The best market The digital currency market is one of the most popular financial markets in terms of attracting capital and traders. In addition, this market has experienced a significant increase in prices in recent years and has been able to attract many traders. Also, you can enter the cryptocurrency market and earn a lot of profit by buying and selling digital currency. For this, you need to learn the necessary exercises and perform your activities without any problems.
It is interesting to know that the digital currency market is a new and growing market that has many terms and concepts and you must know these terms and concepts to work in this market. One of these concepts is the hard cap concept. In the initial coin offering, which consists of digital currency projects to attract capital, the two concepts of hard cap and soft cap are very important.
What is Hard Cap?
If you are active in the digital currency market, you may have heard of the hard cap concept and want to learn more about it. To answer this question, we can say that hard cap is the maximum supply limit of a project’s digital currency in the digital currency and blockchain market and it is very different from soft cap. Additionally, a hard cap is a limit applied by blockchain code to the maximum number of coins that can be offered in a cryptocurrency project. Thus, a hard cap does not allow the issuance or supply of many digital currencies.
It is interesting to know that the two terms hard cap and soft cap are used in the field of digital money or cryptocurrency markets in connection with the initial issuance of coins or tokens. Hard cap represents the highest value and soft cap represents the lowest value. Also, in the initial offering of a coin or ICO, the term “hard cap” refers to the cap on the number of tokens that can be sold, and in fact, this term indicates the maximum budget that the development team is willing to commit to during the initial offering phase of the Financing and for the sale of own tokens. Therefore, if the collection team reaches the hard cap in the initial offering, it means that the tokens specified for that stage are completely sold.
Hard Cap is the most tradable cryptocurrency in the crypto initial offering. Also, the choice of hard cap and the size of the initial offer depends on the goals of the developer team. And the project team will have to strike a balance between the initial offering of the digital coin and the amount of money available.
What is the importance of using Hard Cap?
As we said in the previous section, the concept of hard cap is used in the cryptocurrency market to maximize the supply of digital money or coins. Furthermore, if a digital currency project has 50 million tokens, it usually does not sell all tokens in the first round of a digital currency initial offering and keeps some of them for the second round, and the number of digital currencies available Or the developers and founders allocate coins to the team. In addition, several cryptocurrencies are also maintained to reward miners or those who confirm transactions.
It is interesting to know that some digital currency projects may also have digital currency token-burning programs. Therefore, they keep some coins in the project of this token sale process on the specified day so that the price of cryptocurrency grows and investors get profit. What is significant is that when tokens burn, many tokens are sent to an encrypted wallet and its password is lost or deleted, so that it is destroyed and no one can access them. Thus, the token is permanently destroyed or burned.
The importance of using a hard cap on a project is to indicate the maximum amount of capital that the development team can attract. Also, if a scheme returns excess capital to its investors over the hard cap, it is considered a warning to investors and causes concern.
What are the types of hard cap applications?
As we said, hard cap has many uses in the digital currency market, which makes the importance of using hard cap in digital currency projects grow. To this end, in this part of the article, we try to examine the various applications of hard caps so that you have information about this field and can familiarize yourself with these applications.
1. Use on analytical sites
One of the types of hard cap applications in the digital currency market, which makes it attracts the attention of many active users and gained a lot of popularity, is that it is used in the analysis site. Also, this hard cap or maximum supply is a parameter that cryptocurrency analysis websites pay attention to. Satoshi Nakamoto set the Bitcoin hard cap at 21 million, which means that the supply of the currency is limited and will never exceed this amount.
2. Maximum supply of digital currency
Another application of the hard cap in the digital currency market is that the hard cap is a limit set by the blockchain code to obtain a maximum supply of the cryptocurrency. Additionally, a hard cap prevents further production or circulation of digital currency.
3. Valuation of the Initial Supply of Coins
Another application of a hard cap is to estimate the initial supply of coins or digital currencies. Investors and users should consider several aspects when evaluating a project or protocol before making a purchase. Hard and soft cap are also the most popular delivery parameters.