Measuring decentralization on the blockchain
Decentralization involves spreading control and decision making on a network rather than a single authority.
Unlike centralized systems, where an entity controls everything, decentralized blockchains distribute data to participants (node). Each node holds a copy of the ledger, ensures transparency and reduces the risk of manipulation or system failure.
In BlockchainA decentralized network provides significant benefits:
- Security: Decentralization reduces the weaknesses associated with the middle points of attack. Without a single control creature, malicious actors find it more difficult to compromise the network.
- Transparency: All transactions were recorded in a public ledger Access to all participants, promoting trust by transparency. This openness ensures that no single creature can manipulate data without consensus.
- Fault tolerance: Decentralized networks are more resilient to failures. Data distribution in many nodes ensures that the system remains operational even when some nodes fail.
So, decentralization is good, but it is not a fixed state. It is more than a spectrum, continuous transfer as network participation, management structures and Consensus mechanisms Swing.
And yes, there is a leader for that. This is called Nakamoto’s coefficient.
What is the coefficient of Nakamoto?
Nakamoto’s coefficient is a scale used to develop the decentralization of a blockchain network. It represents the minimum number of independent creatures – such as validators, miners or node operators – which will need to collude to interrupt or compromise the normal operation of the network.
This concept was introduced in 2017 by former coinbase technology chief Balaji Srinivasan and named the creator of Bitcoin, Satoshi Nakamoto.
A higher coefficient of Nakamoto indicates greater decentralization and security within the blockchain network. In these networks, control is more widely distributed to participants, making it more difficult for any small group to manipulate or attack the system. In contrast, a lower coefficient of Nakamoto suggests fewer creatures holding significant control, increasing the risk of centralization and potential weaknesses.
For example, a blockchain with a Nakamoto coefficient of 1 will be quite centralized, as a single creature can control the network. In contrast, a network with a coefficient of 10 will require at least 10 independent creatures to collude to control, reflecting a more decentralized and safe structure.
Do you know? PolkadotThe high score in the coefficient of Nakamoto is mainly due to the Polkadot’s suspected proof-of-stake mechanism, promoting a distribution of stakes to a large number of validators.
Calculated the coefficient of Nakamoto
This coefficient calculation involves several basic steps:
- Recognizing major creatures: first, find out the main actors within the network, such as Mining poolsValidator, node operator or stakeholder. These creatures play significant roles in maintaining network operations and security.
- Each entity’s control assessment: Next, check the extent of control each determined creature is more than network resources. For example, in Proof-of-work (Pow) blockchain Like BitcoinThis involves the diagnosis of the hashrate distribution in mining pools. In proof-of-stake systems (POS) requires stake distribution testing in validators.
- Summary to determine the 51% threshold: after the individual controls are evaluated, the creatures ranked from the highest to the lowest based on their influence. Then, combine -added their control percentages until the total exceeds 51%. The number of creatures required to reach this threshold represents the coefficient of Nakamoto.
Consider a POW blockchain with the following mining pool distribution:
- Mining Pool A: 25% (of total hashrate)
- Mining Pool B: 20%
- Mining Pool C: 15%
- Mining D: 10%
- Other: 30%
To determine Nakamoto’s coefficient:
- Start with the mining pool A (25%).
- Add mining pool B (25% 20% = 45%).
- Add mining pool C (45% 15% = 60%).
In this situation, the integrated hashrate of the mining pools A, B and C reached 60%, exceeding the 51% threshold. Therefore, the coefficient of Nakamoto is 3, indicating that collision with these three creatures can compromise the integrity of the network.
Do you know? Despite the Bitcoin reputation for decentralization, the mining subsystem is noticeably centralized. Nakamoto’s coefficient is currently 2 for Bitcoin. This means that only two pools control the majority of bitcoin mining power.
Nakamoto coefficient limits
While the coefficient of Nakamoto serves as an important measure for the assessment of blockchain decentralization, it possesses some limitations that guarantee careful consideration.
Example:
Static snapshot
Nakamoto’s coefficient provides a static snapshot of decentralization, reflecting the minimum number of creatures needed to compromise a network at a certain point in time.
However, blockchain networks are dynamic -new, with participants’ duties and influence emerging due to factors such as staking, changes in mining power or node participation changes. Consequently, the coefficient may not accurately obtain these temporal shrines -change, which potentially leads to outdated or misleading assessments.
Subsystem focus
This measure is usually focused on specific subsystems, such as validators or mining pools, which potentially overlook other critical aspects of decentralization. Factors such as differences -client software, geographic distribution of nodes and token -owned concentrations significantly affect the decentralization and security of a network.
Only relying on Nakamoto’s coefficient can result in an incomplete review.
DIFFERENCE -ABIFICATION MECHANISM
Different blockchain networks use different consensus mechanisms, each of which influences decentralization differently. Nakamoto’s coefficient may not even apply to these different systems, which are required by specialized techniques for accurate measurement.
External influence
External factors, including regulatory actions, technology advances or market dynamics, can influence decentralization over time. For example, regulatory policies in specific regions may affect the operation of nodes or mining facilitiesThus the scene of the decentralization of the network is changing.
Nakamoto’s coefficient may not account for such externals, limiting its completeness.
In total, the coefficient of Nakamoto is of useful for assessing certain aspects of blockchain decentralization. It should be used next to other metrics and skill assessments to obtain a comprehensive understanding of the decentralization and security of a network.
