The Nakamoto Coefficient measures the minimum number of independent entities required to compromise a decentralized system. This metric quantifies the degree of decentralization in a blockchain by identifying the smallest number of validators, mining pools, or other controlling entities whose collusion could disrupt network operations or censor transactions. A higher Nakamoto Coefficient indicates greater decentralization and, consequently, increased resilience against attacks or single points of failure. It serves as an important indicator of a network’s security and censorship resistance.
Context
Discussions surrounding the Nakamoto Coefficient are crucial for assessing the decentralization claims of various blockchain protocols, particularly in proof-of-stake systems. A key debate involves how different network designs and incentive structures influence this coefficient and the trade-offs between decentralization and scalability. Future research aims to develop more comprehensive metrics for evaluating network resilience and to promote design choices that enhance decentralization.
New non-linear stake weighting models diminish the marginal utility of large pools, structurally incentivizing stake distribution for robust decentralization.
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