Cardano’s absence from the Nakamoto Coefficient (NC) metric has sparked significant discussions in the cryptocurrency world concerning the concept of decentralization. This notable omission has generated considerable interest and debate within the crypto community. The Nakamoto Coefficient, originally developed for assessing decentralization in proof-of-work (PoW) networks, has gained relevance in the context of proof-of-stake (PoS) systems.
Conspicuously absent from data providers like Chainflow, Cardano, currently the sixth-largest asset by market capitalization, raises questions about its decentralization when assessed using the Nakamoto Coefficient. This omission has sparked debates about Cardano’s level of decentralization.
The Nakamoto Coefficient ranks blockchain networks based on the number of independent entities that could potentially collude to disrupt the network. A higher NC is generally associated with greater decentralization. Surprisingly, the lesser-known blockchain Mina boasts the highest Nakamoto Coefficient at 88, while Ethereum, the most widely used blockchain, has a mere NC of 2.
The absence of Cardano from the Nakamoto Coefficient index can be attributed to its unique design, particularly its utilization of the Ouroboros consensus model, which diverges from traditional PoS approaches. Moreover, it operates on a two-tiered layer system, separating execution and computation layers. These intricacies make it challenging to fit Cardano into the Nakamoto Coefficient framework.
However, alternative tools provide insights into Cardano’s decentralization. For instance, the Cardano blockchain explorer Cexplorer reports a Nakamoto Coefficient of 35 as of December 2023, using the Minimum Attack Vector (MAV) metric. This metric implies that 35 entities would need to collaborate to execute a 51% attack on the Cardano network.
Another tool, the Edinburgh Decentralization Index from the University of Edinburgh, suggests that Cardano’s Nakamoto Coefficient surpasses 50. This figure represents the number of independent entities producing 50% of the network’s blocks over a specific period.
It’s crucial to understand that there’s no perfect metric for measuring decentralization on public blockchains, as the objectives and attack vectors can vary widely. Cardano’s exclusion from one popular index does not necessarily indicate lower decentralization.
Cardano’s uniqueness in design and consensus model may explain its absence from the Nakamoto Coefficient index by Chainflow. Nonetheless, alternative metrics and tools suggest that Cardano has achieved a level of decentralization that supports its status as one of the most popular and promising blockchains in the world. Decentralization remains a nuanced concept in the crypto space, and exploring multiple metrics provides a more comprehensive perspective on blockchain networks’ true decentralization levels.
