Limitations of the Nakamoto coefficient While the Nakamoto coefficient serves as a valuable metric for assessing blockchain decentralization, it possesses certain limitations that warrant careful consideration. For example: Static snapshotThe Nakamoto coefficient provides a static snapshot of decentralization, reflecting the minimum number of entities required to compromise a network at a specific point in time. However, blockchain networks are dynamic, with participant roles and influence evolving due to factors like staking, mining power shifts or node participation changes.
It represents the minimum number of independent entities — such as validators, miners or node operators — that would need to collude to disrupt or compromise the network’s normal operation. This concept was introduced in 2017 by former Coinbase chief technology officer Balaji Srinivasan and was named after Bitcoin's creator, Satoshi Nakamoto. A higher Nakamoto coefficient indicates greater decentralization and security within the blockchain network.
Polkadot's high score on the Nakamoto coefficient is largely due to Polkadot's nominated proof-of-stake (NPoS) consensus mechanism, which promotes an even distribution of stakes among a large number of validators. Calculating the Nakamoto coefficient Calculating this coefficient involves several key steps:Identification of key entities: First, determine the primary actors within the network, such as mining pools, validators, node operators or stakeholders.
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Author / Journalist: Cointelegraph by Bradley Peak
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