A simple yardstick for measuring how decentralized a blockchain is: the smallest number of independent entities that would need to collude to disrupt the network. The higher the Nakamoto Coefficient, the more parties an attacker would have to coordinate.
For proof-of-stake systems the coefficient is typically computed across stake pools, validators, or block producers; for proof-of-work it is computed across mining pools. Either way, a single low number signals concentration risk.
Explore next
- Edinburgh Decentralisation Index (EDI)A research framework developed by Input Output and the University of Edinburgh to measure and compare decentralization across blockchain systems.View term
- Proof of StakeA consensus mechanism where validators are selected to create blocks based on the amount of cryptocurrency they hold and stake (commit) to the network.View term
- Stake PoolA server node that participates in the Cardano network by validating transactions and producing blocks.View term