TL;DR

Circulating supply is the number of tokens available for trading at any given point in time. It starts at the TGE unlock amount and grows as vesting schedules release locked tokens over months and years. Circulating supply is the denominator in market capitalization calculations and the most important metric for understanding a token’s real liquidity and sell pressure potential.

How It Works

Circulating supply is not a static number. It changes every month as vesting schedules release tokens, cliff periods expire, and (if enabled) inflation emissions create new tokens. Understanding how circulating supply evolves over time is fundamental to evaluating a tokenomics plan.

The Starting Point: TGE

At the Token Generation Event, circulating supply equals the sum of all TGE unlocked tokens across every allocation category. This is the month-0 snapshot in the 60-month timeline.

For the Standard DeFi template, that calculation produces a TGE circulating supply of roughly 17.5% of total supply. For the Fair Launch template, it exceeds 50%. The starting point varies dramatically depending on the TGE unlock settings, which is why those settings are among the most consequential decisions in tokenomics design.

How Circulating Supply Grows

After TGE, circulating supply grows through two mechanisms:

Vesting releases are the primary driver. Each allocation category has a vesting schedule that releases tokens over its vesting duration after its cliff period expires. As months pass, more categories’ cliffs expire and more vesting tranches unlock. The circulating supply is the running total of all unlocked tokens across all categories at any given month.

Inflation emissions are the secondary driver, present only when enabled. Inflation creates new tokens beyond the original total supply. These tokens are added on top of the vesting unlocks. The inflationTokens function compounds at the monthly rate derived from the annual inflation percentage, and the emissions continue for the configured duration in years.

The timeline computation captures both mechanisms in the MonthlySnapshot structure. Each month records the circulatingSupply (total unlocked tokens including inflation) and circulatingPct (circulating supply as a percentage of the original total supply).

Circulating Supply vs. Total Supply

These two metrics answer different questions:

Total supply answers: “How many tokens exist?” At TGE, total supply is the fixed number created. If inflation is enabled, total supply grows over time as new tokens are emitted. The totalSupplyWithInflation field in each monthly snapshot tracks this.

Circulating supply answers: “How many tokens can be traded right now?” This is always less than or equal to total supply. The gap between circulating and total supply represents locked tokens that are still in cliff periods or vesting schedules.

This distinction matters enormously for valuation. A token’s market capitalization uses circulating supply (price multiplied by circulating tokens), while Fully Diluted Valuation (FDV) uses total supply (price multiplied by total tokens). A project with 15% circulating supply and a $30 million market cap has an FDV of $200 million. That $170 million gap represents the value of tokens that will eventually enter circulation and create potential sell pressure.

The Supply Curve Shape

The shape of the circulating supply curve over 60 months reveals a project’s supply philosophy:

Front-loaded supply means most tokens unlock within the first 12-18 months. This happens when vesting durations are short and TGE unlocks are high. The curve rises steeply and then flattens. Fair Launch projects typically have front-loaded supply curves.

Balanced supply spreads unlocks across 24-36 months. The curve rises steadily without dramatic jumps. Standard DeFi and Community DAO templates produce balanced supply curves.

Back-loaded supply keeps most tokens locked for 24+ months. The curve stays flat early and then rises. This happens with long cliff periods and extended vesting durations. Venture-Backed templates tend toward back-loaded supply because investor and team tokens have longer lockups.

Each shape has tradeoffs. Front-loaded supply provides maximum early liquidity but creates compressed sell pressure. Back-loaded supply reduces early sell pressure but means large unlock events in later months that the market must absorb.

Key Milestones in the Supply Curve

Several milestones in the circulating supply timeline are particularly significant:

Month 0 (TGE): The initial circulating supply, determined by TGE unlock percentages. This number sets the starting conditions for price discovery.

First cliff expiry: When the shortest cliff in any meaningful allocation category expires, a new source of tokens begins flowing into circulation. If multiple categories have the same cliff length, this can be a large step-up in supply.

Crossover month: The month when community-owned circulating supply exceeds insider-owned circulating supply. The crossoverMonth in the results output tracks this. An earlier crossover month indicates faster decentralization, which is generally viewed positively.

Full unlock month: The month when all vesting is complete and circulating supply equals total supply (excluding inflation). The fullUnlockMonth in the results marks when the last vesting schedule finishes. After this month, supply is static unless inflation is active.

The Vesting Area Chart

The stacked area chart is the visual representation of circulating supply over time. Each allocation category is shown as a colored band stacked on top of the others. The total height at any month equals the circulating supply.

This visualization makes it easy to spot problematic patterns:

• A tall band appearing suddenly indicates a large cliff drop
• A steep overall rise means supply is expanding quickly
• Flat periods followed by sharp rises show where cliffs are expiring
• The ratio of insider colors (orange, amber) to community colors (green, blue, purple) shows how ownership balance shifts over time

Circulating Supply and Sell Pressure

Every token that enters circulation is a token that can be sold. The rate at which circulating supply grows directly correlates with potential sell pressure. If 5% of supply unlocks in a single month, the market must absorb potential selling from those newly unlocked holders.

This is why gradual, predictable supply growth is preferred over large step-changes. Monthly vesting creates small, regular supply increases that the market can absorb through normal trading volume. Quarterly vesting creates larger but less frequent increases. And post-cliff unlocks create the most concentrated supply events.

Projects that carefully structure their vesting to produce smooth circulating supply growth curves tend to have healthier price action because the market never faces a sudden wall of new supply.

Try It Yourself

Watch circulating supply evolve month by month as you configure vesting schedules and TGE unlocks. The stacked area chart shows exactly which categories contribute to circulating supply at every point in the 60-month timeline. Try the Tokenomics Designer →

Related Concepts

• TGE Unlock: Determines the initial circulating supply at month 0 by setting what percentage of each category is immediately available.
• Vesting Schedule: The mechanism that grows circulating supply over time by releasing locked tokens according to linear, monthly, or quarterly schedules.
• Token Generation Event: The starting point of the circulating supply timeline, marking month 0 when the token becomes tradeable.

Frequently Asked Questions

What is the difference between circulating supply and total supply?

Total supply is the fixed number of tokens created at the Token Generation Event. Circulating supply is the subset of total supply that is currently unlocked and available for trading. At TGE, circulating supply might be 15% of total supply. Over 3-5 years, circulating supply gradually approaches total supply as vesting schedules release locked tokens. If inflation is enabled, total supply itself grows, creating additional tokens beyond the original amount.

How is market cap calculated using circulating supply?

Market capitalization equals the token price multiplied by the circulating supply. For example, a token priced at $2.00 with 10 million tokens in circulation has a market cap of $20 million. This is different from Fully Diluted Valuation (FDV), which multiplies the price by the total supply. The gap between market cap and FDV indicates how much locked supply will eventually enter circulation, creating future sell pressure.

Why does circulating supply increase in steps rather than smoothly?

Circulating supply increases in steps when projects use monthly or quarterly vesting curves. Monthly vesting releases a batch of tokens at the end of each month, creating small step increases. Quarterly vesting releases larger batches every three months. Only linear vesting produces a smooth, continuous increase. The stacked area chart in the tokenomics designer visualizes these step patterns across all categories, showing exactly when each batch of tokens enters circulation.

Can circulating supply decrease?

In a standard vesting model, circulating supply only increases over time because vesting is a one-way release mechanism. However, some projects implement token burns, where circulating tokens are permanently destroyed, reducing circulating supply. Buyback-and-burn programs and transaction fee burns are common mechanisms. The tokenomics designer models the forward-looking unlock and inflation schedule but does not model burn mechanisms, as burn rates depend on network activity and governance decisions that cannot be predetermined.

What circulating supply percentage is typical at TGE?

Most well-structured projects have 10-25% of total supply circulating at TGE. The Standard DeFi template produces roughly 17.5% TGE circulation. Community DAO templates may have slightly higher TGE circulation due to larger community unlocks. Fair Launch projects can have 50%+ TGE circulation because their philosophy is maximum immediate distribution. Below 10% creates liquidity concerns, while above 30% increases day-one sell pressure risk.

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