Tokenomics is the set of rules that decides how many tokens exist, who gets them and when, and what, if anything, ties a token to real demand. To read it, compare circulating, total and maximum supply, check market cap against fully diluted value, look up the unlock schedule, and ask whether usage of the product actually reaches holders. A token can look cheap until you see how much supply is still coming.
What do circulating, total and max supply mean?
These three numbers describe tokens trading today, tokens that exist, and tokens that may ever exist. Definitions below follow CoinGecko's guide; data sites differ in the details.
| Term | Meaning | Example |
|---|---|---|
| Circulating supply | Tokens publicly available and trading | Excludes locked team and investor tokens |
| Total supply | All tokens created so far, minus burned ones, including locked and reserved tokens | Arbitrum's 10 billion ARB at launch |
| Max supply | The ceiling on tokens that will ever exist, if there is one | Bitcoin's 21 million |
A max supply is a rule, and rules differ. Bitcoin's cap is built into the protocol, and its issuance falls on a fixed schedule through the halving. Ether has no fixed cap, and its supply can rise or fall with usage. Arbitrum's documentation calls 10 billion the initial supply and lists inflation of up to 2% a year, so that figure is not a permanent ceiling either.
Market cap vs. FDV: a worked example
Market cap is the price multiplied by circulating supply. Fully diluted value (FDV) is the price multiplied by all the tokens that are or will be issued. The gap between them shows how much supply has yet to reach the market.
Take an invented token priced at $2:
| Measure | Tokens | Value at $2 |
|---|---|---|
| Circulating supply (market cap) | 100 million | $200 million |
| Total supply (FDV on some sites) | 400 million | $800 million |
| Max supply (FDV on others) | 1 billion | $2 billion |
Only 10% of the eventual supply is trading, a situation often called low float. Three things follow:
- Holding $2 takes far more money later. If all 1 billion tokens circulate and the price is still $2, the market cap must be $2 billion. If the market cap stays at $200 million, the price is $0.20.
- Sites can disagree. CoinGecko's formula uses total or max supply, depending on what exists, so check which figure a site uses before comparing FDVs.
- FDV is a yardstick, not a forecast. It assumes today's price holds for tokens that don't yet trade. Prices adjust, and many of those tokens may be years away.
Binance Research warned about this pattern in May 2024, estimating that about $155 billion of tokens would unlock from 2024 to 2030.
How do vesting, cliffs and unlocks work?
Vesting means tokens promised to someone are released over time rather than all at once. A cliff is a waiting period with no release at all, often followed by a large first unlock. An unlock is the moment locked tokens become transferable. Unlocked does not mean sold. It means the holder is now able to sell.
Arbitrum gives a clear real example, using its own published numbers:
- Allocation. Team and advisors got 26.94% of the initial supply, and investors got 17.53%. Together that is 44.47%, or about 4.45 billion ARB.
- Creation. The token was generated on March 16, 2023, with those tokens locked.
- Cliff. The schedule has four-year lockups, with the first unlocks one year after that date.
- First unlock. On March 16, 2024, 1.11 billion ARB unlocked, reported as enough to nearly double the roughly 1.45 billion in circulation.
- Monthly release. About 92.64 million ARB per month was scheduled for the following three years.
One date could add about three-quarters to the tokens available to trade. Anyone reading only the market cap beforehand saw a small part of the picture.
Do unlocks push prices down? A Keyrock study reported in December 2024 looked at over 16,000 unlock events and found about 90% were followed by price declines. Larger unlocks led to harsher drops. Team unlocks did worst, while ecosystem unlocks tied to growth could help. Treat this as a pattern and not a law. Keyrock is a market maker, we relied on press coverage of its study, and a fall after an unlock doesn't prove the unlock caused it.
Emissions and burns: supply can flow both ways
Emissions are new or reserved tokens paid out over time, usually as rewards for staking, providing liquidity or using a product. Burns remove tokens permanently by sending them to an address nobody can spend from, or by destroying them in the contract. What matters is the net result.
A common misconception is that a high yield paid in the token itself is income. Suppose a protocol pays 10% a year to stakers from new tokens, and everyone stakes. Each staker ends the year with 10% more tokens, but the supply also grew 10%, so everyone's share of the network is unchanged. Anyone who doesn't stake gets diluted. Real return has to come from fees that someone actually pays.
Two real burn designs show the range:
- Fee burns. On Ethereum, the base part of every gas fee is burned. New ether also goes to validators, so whether supply shrinks depends on network use.
- Treasury burns. Uniswap's governance burned 100 million UNI from its treasury on December 28, 2025, and turned on protocol fees for burning UNI on Uniswap v2 and selected v3 pools.
Those burns are not the same. Tokens burned from a treasury weren't trading, so that kind of burn lowers total supply more than it lowers what's on the market. Before believing a headline, ask where the burned tokens came from and whether new emissions offset them.
What is value accrual?
Value accrual is the link, if any, between a product being used and the token being worth more. Plenty of busy products have tokens with no such link.
| Link | How it works | Example | Question to ask |
|---|---|---|---|
| Required for use | You need the token to pay for the service | ETH for gas | Can users pay in something else? |
| Fee burn | Usage destroys tokens | Ethereum's base fee | Does it exceed emissions? |
| Fee-funded burn | A protocol's fees reduce supply | UNI after 2025 | Which markets pay, and how much? |
| Security or staking | Holders stake to secure the network and earn rewards | Staked ETH in proof of stake | Are rewards from fees or from new tokens? |
| Governance | Holders vote on rules or treasury | DAO voting | Can votes actually direct revenue? Who holds the votes? |
| Attention only | Price rests on demand alone | Memecoins | Is anything left when attention moves on? |
Also check the difference between a token and company equity. A company can hold revenue and intellectual property while token holders have no legal claim on either. Read the terms, and don't assume a successful product means a successful token.
How to read a token: a checklist
Use primary documents first, then a tracker such as Tokenomist to cross-check. Trackers can lag, and a project's docs can be outdated too.
- Get all three supply figures from one source, and note whether FDV uses total or max supply.
- Work out the float. Divide market cap by FDV. For the token above, that is 10%.
- Read the allocation. Add up team, investors and advisors. Compare that with what went to users, including any airdrop.
- Map the next 12 months of unlocks. Divide the coming unlocks by today's circulating supply. A figure of 50% means trading supply could grow by half.
- Find the big dates. Note cliffs and who receives them. Teams and early investors often paid little for their tokens, so they may be more willing to sell.
- Check emissions. How many new tokens are paid out each year, to whom, and for what activity?
- Check net burns. Compare burns with emissions over a real period, not one good week.
- Follow the demand. Does the protocol collect fees, and does any of that reach the token?
- Look at holders. On a block explorer, exclude exchanges, treasuries and vesting contracts, then see who is left.
- Ask who can change the rules. Can anyone mint more, alter a schedule or vote to raise emissions?
Two habits save a lot of confusion. Ignore a token's unit price, because a $0.001 token isn't cheaper than a $100 one until you account for supply. And read liquidity separately, because an automated market maker's pool can only pay sellers what it holds.
None of this says whether a token will rise. Strong tokenomics can't save a product nobody wants, and heavy unlocks can coincide with rising prices. This is education and not financial or tax advice, and rules vary by country. For more on the mechanics, see our tokens hub and the Arbitrum hub.
Key takeaways
- Circulating supply is what trades today, total supply is what exists, and max supply is the ceiling, if there is one.
- Market cap uses circulating supply and FDV uses total or max supply, so the gap shows how much is still to come.
- Vesting and cliffs set when insiders can sell. Arbitrum's first team and investor unlock was large enough to nearly double its circulating supply.
- High yields paid in new tokens can be dilution, not income.
- Judge burns by their source and by net supply over time, rather than by the headline number.
- Value accrual is a specific link between usage and token, and many tokens don't have one.
Sources
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