Token issuance is the process of creating new tokens and adding them to the total token supply of a cryptocurrency.
What is token issuance?
Token issuance is one of the most important processes in the world of blockchain technology
. Essentially, token issuance is the process of creating new tokens that are then added to the total supply of the cryptocurrency.
Depending on the blockchain and cryptocurrency, token issuance may take different forms. Usually, token issuance is regulated by complex algorithmic
calculations that determine the amount of tokens necessary for the blockchain ecosystem to function properly. The total supply of tokens for each cryptocurrency is different. The amount of tokens comprising the total supply is also calculated through complex algorithmic functions.
It is important that blockchain-based projects and cryptocurrencies, in general, detail how the process of token issuance works for their specific system. As there are numerous consensus mechanisms
out there, different crypto blockchains have various setups when it comes to token issuance.
For example, the Bitcoin
whitepaper details that there can only ever be 21 million Bitcoin tokens. Consequently, Bitcoin issuance will cease once this threshold of 21 million tokens is reached. Other cryptocurrencies have opted not to have a maximum supply limit. Regardless of the style and type of cryptocurrency, token issuance is one of the most important processes, and it has to be described in detail.
Going back to consensus mechanisms, some cryptocurrencies also utilize a process called token burning. This is the complete opposite of token issuance, as tokens are effectively destroyed forever. Some consensus mechanisms rely on a combination of token issuance and token burning to ensure there is agreement across the network of nodes.
Token issuance may also refer to the process of tokenization, in which an asset outside of the cryptocurrency ecosystem is added to the blockchain via a specific crypto token. In such cases, token issuance becomes the process of creating a token, yet not one that belongs to a cryptocurrency, but rather a token that represents an outside asset.
In the world of cryptocurrency, token issuance is very important. The rules governing token issuance on different projects help investors determine whether they want to invest in the project or not. Additionally, these rules can also have an impact on the valuation of cryptocurrencies. More often than not, cryptocurrencies that have a fixed maximum supply experience price hikes when the blockchain is close to reaching this maximum supply limit.