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How to determine the extent of decentralization of a cryptocurrency?


There are various parameters to gauge upon a cryptocurrency to ascertain the extent of its decentralization and some of the important parameters are:-

1.Coin Supply

The total supply of the coin and its distribution plays a key role to ascertain the extent of decentralization of a coin. If the coin’s distribution is more even then it is a sign of decentralized cryptocurrency. If a few numbers of people have higher percentage of coins, then it will influence the decision making and price of the coin. Therefore an ideal decentralized coin is evenly distributed.

Example:- In case of DASH the top 100 token holder account for 15% of the total coin supply. In case of Ripple, it is 81%. From this figure you can judge which coin is centralized and which coin is decentralized in terms of its coin supply.


A decentralized cryptocurrency is ideally an open-sourced project. An open-source project truly symbolizes the spirit of decentralization as it underlies with the principles of open collaboration, sharing of the entire community. No single user/entity takes control of the software and its development. In an open-source project anyone can offer a new code and suggest changes.

Example:-Bitcoin is a perfect example of open-source crypto coin. If you check the repository on Github it has over 18000 contributions from 560 contributors.

3.Mining & Staking Power

For an ideal decentralized cryptocurrency, there should not be concentrated mining/staking power as that will influence the mining/validating the network in a centralized way. 

Example:- In Bitcoin the hashing power is mostly controlled by China and almost 4 mining pools(on the basis of geographical location) all over the world accounts for 50% of the mining power, this is a setback to the spirit of decentralization.

In case of NEO, it owns and controls all the validating nodes that mean the validation of the network is centralized and that is why it drew a lot of criticism in crypto space.

4.Decision Making Process

How good and organized a crypto project/community in including the community members in various decision making process is a key aspect of decentralization and if it takes the feedback of people from time to time in the form of polls, suggestions and if a community/project is doing it, that means the cryptocurrency is keeping the spirit of decentralization intact.

Thank you and Have a great day.