An exclusion of Cardano from the list of top blockchains by the Nakamoto Coefficient metric has caused many to wonder if the network is sufficiently decentralized.
Cardano is the sixth-largest asset by market capitalization. However, many users have been keen to point out that the network is excluded by data providers such as Chainflow, which measures the Nakamoto Coefficient (NC) metric.
The metric was first introduced in 2017 by then Coinbase CTO Balaji Srinivasan as a way to measure the number of block producers on a network that could collude to harm the network.
While the metric initially served to measure decentralization on a proof-of-work (PoW) network, it has since been adapted for proof-of-stake (PoS) systems. The core measurement is that the higher the Nakamoto coefficient, the more decentralized a network is assumed to be.
However, the Cardano network is notably missing from the most widely used database in the crypto space for checking a blockchain’s Nakamoto coefficient. The Nakaflow tool (built by Chainflow) lists other popular chains such as Cosmos, Ethereum, Solana, Polygon, and Mina.
Mina, a lesser-known blockchain, is notably ranked as the most decentralized network by the Nakamoto Coefficient, with a reported figure of 88 at the time of writing.
On the other hand, the most widely used blockchain, Ethereum, has a Nakamoto coefficient of 2, suggesting that only two independent entities can partner to censor transactions on the network.
Why Is Cardano Missing, and What is Cardano’s Nakamoto Coefficient?
The omission of Cardano from the tool may largely result from Cardano’s distinct design. Cardano does not operate a typical proof-of-stake (PoS) consensus model but instead uses a unique version called Ouroboros.
Cardano also operates a two-tiered layer model where the execution and computation layers are separate systems. These complexities may account for its exclusion from the Nakamoto Coefficient index by Chainflow.
Nonetheless, other tools exist as an alternative for finding Cardano’s Nakamoto coefficient. For instance, the popular Cardano blockchain explorer Cexplorer quotes Cardano’s Nakamoto coefficient as 35 (as of December 2023). Yet, the data provider notes that this metric slightly differs from the popular NC index.
Cexplorer uses the MAV, which measures the minimum attack vector, or the number of entities that may collude to execute a 51% attack on the network. Using this metric means that 35 different entities would need to collaborate to halt the Cardano network.
Meanwhile, another tool for measuring Cardano’s decentralization is the Edinburgh Decentralization Index developed by the University of Edinburgh.
The tool suggests that Cardano has a Nakamoto Coefficient well above 50, with the figure representing the number of independent entities that produce 50% of the blocks on a network over a given period.
Theoretically, the perfect metric for measuring decentralization on a public blockchain does not exist, as the attack vectors and objectives may differ. The exclusion of Cardano from a popular index does not necessarily mean that the network is less decentralized.
Using other tools, Cardano is shown to have achieved a level of decentralization that supports its existence as one of the most popular blockchains in the world.
Disclaimer: This content is informational and should not be considered financial advice. The views expressed in this article may include the author's personal opinions and do not reflect The Crypto Basic’s opinion. Readers are encouraged to do thorough research before making any investment decisions. The Crypto Basic is not responsible for any financial losses.
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