The Nakamoto coefficient measures the decentralization of a blockchain network by giving the minimum number of validators or nodes that have to work together to control or compromise the network.
The most important thing summarized:
💡 A higher Nakamoto coefficient indicates more decentralization, since more independent actors are needed to achieve a majority. This makes the network more resistant to attacks and manipulations.
💡 The coefficient is calculated by determining the smallest group of nodes or validators, whose cumulative control reaches 51% or more of the network.
💡 The coefficient is an important indicator of the safety and stability of a blockchain network. A low Nakamoto coefficient can indicate potential security risks and greater centralization.
In this article we become the Nakamoto coefficient, its importance for the decentralization of Blockchain networksExamine methods for calculation and the associated advantages and disadvantages.
What is the Nakamoto coefficient?
The Nakamoto coefficient is one Quantitative measure for the decentralization of blockchain networks. It gives the minimal number of independent units (e.g. Knotes (nodes) Or validators) who would have to work together to disturb the network or to take control of it.
This is named after Satoshi Nakamotothe pseudonym of the Bitcoin-Finder, and was first in 2017 by Balaji Srinivasan, the former CTO der Crypto exchange Coinbase, formally described.
The coefficient helps to understand how decentralized a blockchain network is by revealing how many entities have enough control to potentially disturb the network. The higher the Nakamoto coefficient, the more decentralized and safer the network against such threats.
Calculation of the Nakamoto coefficient
In this section we illuminate how the Nakamoto coefficient is calculated and illustrate this using practical examples.
Instructions for calculation
The Nakamoto coefficient is determined by the number of independent entities (such as MinerValidator or Node operator) that are necessary to achieve a majority in the network and to control it.
In particular, the smallest number of these entities that have to come together are to achieve 51% of control over the network. The calculation requires a detailed analysis of the network structure and the distribution of the control power among the parties involved.
Practical example
Let us assume that a blockchain network consists of 20 independent validators. Each validator has exactly the same power or the same share in the network. In order to be able to obtain a majority control over the network and manipulate the blockchain, a majority of over 50% would be required.
In this case, the Nakamoto coefficient of network 11 would be. This means that at least 11 of the 20 validators have to work together to achieve a majority and potentially compromise the network. This number reflects the minimum number of nodes (or validators) that are necessary to take control of the network.
Disadvantages of the Nakamoto coefficient
Although the Nakamoto coefficient is a useful tool for measuring decentralization, it also has its limits. It does not take into account the distribution of power or influence, which can go beyond the pure number of nodes or participants.
In some cases, networks with a relatively high Nakamoto coefficients can also be centralized in practice through centralized power structures or the dominance of individual large actors. Furthermore, the coefficient does not reflect the possibility that external factors such as regulatory interventions or socio -economic conditions could affect the stability and safety of a network.
Common questions (FAQ) about Nakamoto coefficient
In this section we answer the most important and most common questions about Nakamoto coefficient.
The Nakamoto coefficient varies greatly between different blockchain protocols, depending on their structure and governance. At Bitcoin, the coefficient is higher than with smaller or less decentralized blockchains. Comparing the coefficient can help investors and users assess the relative risk of 51%attacks.
Companies that want to use blockchain technology can consider the Nakamoto coefficient as a factor to evaluate network security. A higher coefficient indicates a stronger decentralization and thus a lower susceptibility to certain types of attacks or failures.
Yes, a decrease in the Nakamoto coefficient over time can be an indicator of increasing centralization in a blockchain network. This could be a signal for the community and the network participants to take measures to restore decentralization.