Definition ∞ The Herfindahl-Hirschman Index, or HHI, is a measure of market concentration and competition. It is calculated by summing the squares of the market shares of all participants in a market, resulting in a number between zero and ten thousand. A higher HHI indicates greater market concentration and less competition. In digital asset contexts, it can assess the distribution of power among validators, miners, or token holders within a blockchain network, indicating potential centralization risks.
Context ∞ Analysts frequently apply the Herfindahl-Hirschman Index to gauge the degree of decentralization in various aspects of blockchain ecosystems, such as mining pools or staking operations. A high HHI value in these areas often triggers discussions about the network’s resilience to attacks or undue influence by a few large entities. This metric offers a quantitative tool for understanding the competitive landscape and distribution of control within digital asset systems.
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