When people talk about how decentralized Bitcoin is, they usually mean one of two things.

  • Concentration of power
  • Contestability

🔹 1. Concentration of Power

This is often measured using the Nakamoto coefficient, which asks:

How many entities would need to collude to take over or disrupt the network?

For Proof of Work (PoW), the threshold is 51% of mining power.
For Proof of Stake (PoS), it’s usually 67% of staked tokens.

Let’s compare:

  • Bitcoin (PoW):
    Requires only 3 mining pools to control 51% of the hash rate.
    Source: https://bitref.com/pools/
    → Nakamoto coefficient: 3

  • Ethereum (PoS):
    Requires around 10 entities to reach 67% of staked tokens.
    Source: https://explorer.rated.network/
    → Nakamoto coefficient: 10

For context, traditional systems like central banks or governments often have a Nakamoto coefficient of 1 — there’s a single authority in charge.

🔹 2. Contestability

This one’s harder to define, but it asks:

If you disagree with how things are run, how much say do you have in challenging or weakening entrenched power?

We can express this loosely as a percentage of say — how much influence an individual can realistically exert.

Let’s compare that across systems:

  • Bitcoin (PoW):
    Unless you’re a major industrial miner, your percentage of say is effectively zero.
    ➤ Contestability: near zero

  • Ethereum (PoS):
    You can stake and participate. Your percentage of say is proportional to the amount you stake.
    ➤ Low contestability, but greater than Bitcoin.

  • U.S. Government (democracy):
    You get 1 vote out of the voting population.
    ➤ Contestability: limited, but real

  • North Korea (authoritarian):
    No meaningful ability to influence leadership or direction.
    ➤ Contestability: zero

So using this lens, even flawed democracies like the U.S. offer more contestable decentralization than Bitcoin does.

🧩 Conclusion

Looking at both metrics:

  • Concentration of power: Bitcoin is highly centralized with a Nakamoto coefficient of 3.
  • Contestability: Bitcoin offers no realistic path for ordinary people to challenge power.

In contrast:

  • PoS chains like Ethereum may have some concentration, but they allow more people to participate with a higher percentage of say.
  • Even traditional governments may offer more real-world decentralization in the form of contestability.

So next time someone says “Bitcoin is decentralized”, maybe ask:

“According to what metric — and how do we measure it?”