Crypto glossary
Nakamoto coefficient
The Nakamoto coefficient is the smallest number of entities that together control enough of a network to halt it or corrupt its consensus; higher is better.
Proposed in 2017 by Balaji Srinivasan and Leland Lee, the coefficient turns a vague idea, decentralisation, into a number. You rank the participants in a subsystem by their share, such as mining pools by hashrate or validators by stake, and count how many of the largest must collude to cross the critical threshold: usually 51% for proof-of-work chains and 33% for BFT-style proof-of-stake chains, where a third can stop finality.
Analysts and dashboards publish the metric to compare networks, and teams cite it when arguing that their chain is decentralised. It can be measured for different layers: block production, client software, hosting providers, token ownership or even the number of developers who can merge code.
A single figure hides a lot. Several pools or validators may belong to the same company, stake may be delegated through one exchange, and nodes may sit in the same cloud provider. A network can score well on validators and still depend on one dominant client or a few RPC providers, so the coefficient is a starting point rather than a verdict.
Example
If the three largest Bitcoin mining pools together exceed 51% of hashrate, the network's Nakamoto coefficient for block production is three, even if thousands of individual miners point their machines at those pools.