Decentralization distributes control across a network, enhancing security, transparency, and fault tolerance. The Nakamoto coefficient, introduced in 2017, quantifies a blockchain network's decentralization by indicating the minimum number of independent entities that must collude to disrupt normal operations. A higher coefficient signifies greater decentralization and security. For instance, a network with a coefficient of 1 is highly centralized, while one with a coefficient of 10 requires collusion from at least 10 entities, indicating a more robust structure. Calculating this coefficient involves identifying key actors and their control levels, assessing their cumulative influence until a 51% threshold is reached, representing the coefficient value. However, the coefficient has limitations, as it provides a static snapshot of decentralization, focusing mainly on specific subsystems and not accounting for external influences or different consensus mechanisms. Thus, while useful, it should complement other metrics for a well-rounded understanding of a network’s decentralization and security.

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