Nakamoto Coefficient
A measure of decentralization counting the minimum number of entities that would need to collude to compromise a blockchain's core functions, such as consensus.
The Nakamoto Coefficient estimates how decentralized a blockchain subsystem actually is by counting the smallest number of independent entities — such as mining pools, validators, or node operators — that would need to collude to control a majority (or other threshold relevant to that subsystem) of the resource that secures it. A low Nakamoto Coefficient means control is concentrated in just a few hands, even if there are technically thousands of participants overall.
The metric can be calculated separately for different subsystems of the same network — for example, consensus (mining or staking power), client software diversity, governance, or exchange/custody concentration — since a chain can be decentralized along one dimension while being concentrated along another. A higher Nakamoto Coefficient is generally considered more resistant to a 51% attack (see Kaavon's "51% Attack" glossary definition) or coordinated censorship, since compromising the network would require coordinating a larger, more diverse set of independent parties.
Examples
- A blockchain where the top four mining pools collectively control over half of total hash rate has a consensus-layer Nakamoto Coefficient of four.
- The Nakamoto Coefficient can differ sharply across subsystems — a network might have a reasonably high coefficient for staking power but a much lower one for client software diversity.