Bybit Copy Trading Gold&FX is an MT5–based copy trading system that enables investors to replicate the trading strategies of experienced traders. Learn more.

Looking to enter the world of forex and commodities trading, but feeling overwhelmed by the complexity? Bybit's Copy Trading Gold&FX platform offers a solution that connects novice traders with experienced professionals on the 

This guide explains Bybit Copy Trading Gold&FX in detail and describes how it works, its benefits and risks, and how it compares to other copy trading options. We'll also provide a detailed getting-started guide to help you decide if this platform is right for you.

Bybit Copy Trading Gold&FX is a MetaTrader 5

 system that enables investors to automatically replicate the trading strategies of experienced traders across forex, commodities and market indices.

With Master Traders earning additional income from their followers' successful trades, the platform serves as a bridge between those seeking to profit from traditional financial markets and experienced traders willing to share their expertise. 

How Does Bybit Copy Trading Gold&FX Work?

Bybit Copy Trading Gold&FX operates on a straightforward signal-copying mechanism whereby followers automatically replicate the trades of their chosen Master Traders. The platform uses the high water mark (HWM) principle for profit sharing, ensuring Master Traders are rewarded only when they exceed their previous performance peaks.

Let’s look at a detailed breakdown of how the system works for both parties.

To become a Master Trader, individuals must first apply using an eligible 

. Upon approval, an MT5 account is automatically created, enabling them to start trading. Master Traders need to 

 before they can execute trades, which will then be copied by their followers in real time.

Master Traders earn a profit-sharing fee ranging from 0% to 15%, based on the profits generated for their Followers. This profit-sharing process occurs weekly, specifically every Sunday at midnight, according to the MT5 server time. The HWM principle ensures that Master Traders only receive profit-sharing payments when their Followers’ accounts exceed previous high points. Additionally, a single Master Trader can manage up to 300 followers simultaneously.

To participate in Bybit Copy Trading Gold&FX, Master Traders must use 

 as the margin for their trading positions. Bybit Copy Trading Gold&FX is not available 24/7, and trading may be paused during non-trading hours or system maintenance. You can check notifications on the 

 for the latest updates. Master Traders also have the flexibility to adjust their profit-sharing ratios at any time, allowing them to fine-tune their earning strategies based on market conditions and follower engagement.

Followers can choose their preferred Master Traders from the leaderboard, allowing them to align with traders whose strategies match their investment goals. To start copy trading, Followers must invest a minimum of 100 USDT, while the maximum investment amount is capped at 1,000,000 USDT. Additionally, they can follow up to 10 different Master Traders at the same time, diversifying their trading exposure.

When a Follower subscribes to a Master Trader, their positions are copied proportionally based on the Follower's investment size. As opposed to traditional trading, Followers do not have the option to manually close positions. However, they can set 

 (SL) levels to manage risk. Exiting a position is only possible by either unfollowing the Master Trader, or when TP/SL thresholds are triggered.

The fund management process is designed to be seamless, with automatic fund transfers occurring when Followers initiate copy trading. If a Follower decides to stop copying a Master Trader, their funds are automatically returned to their Funding Account. Furthermore, Followers can manage their investment amounts through the 

, providing them with greater control over their capital allocation.

Benefits of Using Bybit Copy Trading Gold&FX

Bybit Copy Trading Gold&FX offers the compelling benefits listed below for both Master Traders looking to monetize their expertise, and Followers seeking professional trading strategies.

MT5 integration provides access to diverse markets, including forex pairs, commodities, and market indices, allowing traders to maximize earning potential. This exposure helps investors diversify their portfolios beyond cryptocurrency markets, optimizing asset allocation while minimizing risk through traditional finance markets.

Bybit Copy Trading Gold&FX creates opportunities for 

 through the replication of expert strategies, without requiring Followers to have prior trading experience. Its automatic trade execution and position management system removes the complexity of manual trading, while clear performance metrics help evaluate Master Traders' performance and potential.

Master Traders can establish a consistent additional income stream by earning a profit share of up to 15% from their Followers' successful trades. With no initial performance requirements and a capacity for 300 Followers, experienced traders can quickly start monetizing their expertise while building a substantial trading community.

The platform leverages MetaTrader 5's robust infrastructure, offering fast execution speeds and comprehensive multi-asset trading support. 

 help traders make informed decisions, while transparent performance tracking ensures accountability. 

Risks of Using Bybit Copy Trading Gold&FX

As with any trading platform, Bybit Copy Trading Gold&FX comes with inherent risks that both Master Traders and Followers need to understand.

Past performance does not guarantee future results in financial markets. Even experienced Master Traders with strong track records can experience losses, and Followers should carefully evaluate their 

 before committing capital to copy trading strategies.

Followers may experience different entry prices from their Master Traders, due to market conditions, network delays or timing differences. These price discrepancies can impact profitability and yield, varying returns between Master Traders and their Followers.

The profit-sharing model follows the aforementioned HWM principle, meaning Master Traders must exceed their previous performance peaks to earn profit shares. This could potentially influence trading behavior and risk management decisions as traders attempt to surpass their previous high-water marks.

Copy Trading Gold&FX vs. Copy Trading Classic vs. Copy Trading Pro

Let's compare Bybit's three copy trading products and their unique features to help you choose the one that best matches your trading goals.

Copy Trading Gold&FX specializes in traditional financial markets, offering access to forex, indices and commodities via MT5. In contrast, Copy Trading Classic focuses on USDT Perpetual contracts, while Copy Trading Pro encompasses Spot trading and both USDT and USDC Perpetual contracts.

For Copy Trading Gold&FX, Followers cannot manually close positions, and must rely on TP/SL orders (or completely unfollow the Master Trader) to exit trades. Copy Trading Classic offers flexibility, allowing Followers to set various parameters, including leverage and margin mode. Copy Trading Pro represents the other end of the spectrum, whereby Pro Masters have complete control over investors' funds.

Each platform implements different profit-sharing mechanisms. Copy Trading Gold&FX uses the HWM principle, with profit shares ranging from 0–15%. Copy Trading Classic follows a similar range, but with daily profit deductions. Finally, Copy Trading Pro offers the highest potential returns for professional traders, with profit-sharing of up to 30% of gains.

Copy Trading Gold&FX has no specific performance requirements for Master Traders, though MT5 trading expertise is essential. Copy Trading Pro maintains the strictest standards, requiring Pro Masters to meet specific trading criteria and maintain minimum balance requirements. Meanwhile, Copy Trading Classic remains the most accessible option, with no performance prerequisites for Master Traders.

How to Get Started With Bybit Copy Trading Gold&FX

: To begin, make sure you’re logged into your Bybit Subaccount. If you don't have a Subaccount, log in to your Bybit Main Account and click on 

 that a Gold&FX (MT5) Account must not previously have been created using the Subaccount. Full instructions on how to create a Subaccount can be found 

: Read through the specification, confirm you’ve read the 

Copy Trading Gold&FX Terms and Conditions, and click on 

I have understood and agreed to the above agreement

 Now, submit your personal information. After doing so, check the boxes to confirm you’ve agreed to the Bybit MT5 Terms and Conditions and

 to create an MT5 Account using your current account, and then sign up as a Copy Trading Gold&FX Master Trader.

 and wait for approval. Once you’re approved, an MT5 account will automatically be created for you. 

Applications are typically reviewed and processed within one hour.

: Install MetaTrader 5 on your device and launch the application.

. Toggle between the options to find a Master Trader who aligns with your financial goals and risk tolerance.

to begin the process of following a Master Trader.

: Enter your investment amount (minimum 100 USDT). Note that you cannot exceed 1,000,000 USDT per Master Trader.

: Set your take profit and stop loss levels by clicking on 

: Monitor your copied positions through the 

Should You Try Bybit Copy Trading Gold&FX?

Bybit Copy Trading Gold&FX is worth considering if you:

Before participating, carefully evaluate your trading goals and risk tolerance. New traders should choose Master Traders based on consistent performance, rather than just high returns, while experienced traders should ensure they're comfortable with MT5 before applying to become Master Traders.

Bybit Copy Trading Gold&FX bridges traditional finance and modern copy trading, making forex and commodities markets more accessible to diverse traders. While it offers significant opportunities for both followers and Master Traders, success requires careful selection of trading partners and an understanding of the platform's features.

Intermediate

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Bybit Copy Trading Gold&FX: Master MT5 With Expert-Led Strategies

Prom is a layer-2 blockchain built on the Polygon CDK that leverages zkEVM technology to enable secure, fast and cost-efficient transactions across multiple Layer 1 networks. Learn more now!

 is an intuitive blockchain platform built on the 

 technology to enable secure, fast and cost-efficient transactions across multiple 

 (ZKPs) to validate transactions off-chain using ZK-rollups, ensuring scalability, privacy and compatibility with 

This article explores what makes Prom unique, from its zkEVM 

 foundation to its role in bridging blockchain silos. We’ll also delve into Prom’s ecosystem, partnerships and practical applications to show why it’s a game-changer as a multichain solution in the blockchain space.

Prom is a zkEVM Layer 2 platform designed to overcome the limitations of Ethereum's distributed ledger technology (DLT) 

: how to simultaneously provide sufficient scalability, security and decentralization. By emulating the EVM, Prom duplicates all EVM opcodes, enabling seamless integration of existing Ethereum 

. Its zero-knowledge rollups (ZK-rollups) significantly enhance Ethereum's scalability, transaction speed and cost efficiency.

Prom bridges the gap between EVM and non-EVM compatible chains, breaking blockchain silos and fostering 

. Developers can deploy their smart contracts effortlessly, while users can transfer assets securely for off-chain operations. By verifying off-chain computations with ZKPs, Prom ensures transparency and the security of user funds, harmonizing scalability with Ethereum’s trusted security framework.

, introduced after Prom’s mainnet launch. This innovative governance structure empowers PROM token holders to actively participate in decision-making, ranging from contract upgrades to performance enhancements.

The role-based hierarchy within Prom DAO ensures efficiency and transparency. Token holders can assign voting power to delegates who represent their interests, while validators scrutinize and validate proposals. Economic incentives, such as sharing 32% of network fees, reward active participants and drive community engagement.

While the team behind Prom remains semi-anonymous, the platform’s governance-driven structure reflects a community-focused approach to development and network evolution, ensuring Prom’s adaptability and long-term success. Find more info on the team at 

Prom uses the following three key components to achieve its multichain solution.

As stated above, Prom operates as a zkEVM Layer 2 network, leveraging ZKPs to enhance privacy, scalability and security. Transactions are batched off-chain and validated through ZKPs before being finalized on Ethereum Layer 1. 

 is a core component that facilitates this process by managing transaction sequencing, state synchronization and proof aggregation while maintaining the integrity of the network’s state.

Prom is designed to be more than just an Ethereum-compatible Layer 2. Its multichain bridge connects both EVM and non-EVM chains, including networks like Bitcoin and Solana. This broad interoperability enables transfers of assets on multiple chains, fostering liquidity and utility across ecosystems. 

 technology for optimized speed and efficiency, supporting a wide range of tokens, 

Prom’s modular architecture is key to its adaptability. The network’s zkNode software allows trusted Sequencer, Aggregator and remote procedure call (RPC) 

 to operate independently or in tailored configurations. This modularity supports efficient resource allocation and ensures flexibility in connecting various blockchains. 

Additionally, Prom’s compatibility with standard Ethereum tools like MetaMask and Solidity means developers can migrate DApps or deploy smart contracts without any learning curve. This modularity also extends to its database layers, enabling the seamless synchronization of states and transactions across multiple chains.

Prom’s network has strategically positioned itself as a scalable, multichain solution by leveraging partnerships and collaborations that enhance its ecosystem. One notable partnership is with DWF Labs, a significant contributor to Prom’s growth and adoption. DWF Labs also participated in a previous funding round and also gave advisory support, bolstering Prom's technical and community development. You can find all associated ventures, RWA and 

In addition, Prom actively pursues alliances with other blockchain projects and platforms. These partnerships aim to integrate Prom's zkEVM capabilities across ecosystems, creating a bridge between EVM compatible and non–EVM compatible chains. This multichain focus positions Prom as a unifying force in the blockchain space, fostering decentralization and interoperability.

Prom’s Use Cases and Practical Applications

The introduction of Prom's zkEVM is essential to achieving scalability and privacy. By enabling asset and data movement across chains without intermediaries, Prom reduces reliance on centralized bridges, thereby enhancing security and efficiency. Developers and users benefit from lower fees and faster transactions, creating an ideal environment for DeFi, 

zkEVM’s ability to batch transactions reduces gas costs significantly, spreading Layer 1 fees across multiple operations. This makes it especially suitable for applications requiring frequent interactions, such as payments and real-time gaming.

Moreover, ZKPs ensure user privacy by verifying transaction validity without exposing sensitive data. This feature is vital for enterprise applications whose data confidentiality is paramount. Combined with Prom's high throughput, the network can handle more transactions at lower costs than traditional Layer 1 solutions, setting a new standard for efficiency.

In 2024, Prom has proven itself as a potent zkEVM Layer 2 multichain platform, offering enhanced scalability, security and interoperability. Through its innovative use of zero-knowledge proofs and ZK-rollups, Prom has unlocked faster, more cost-efficient transactions while maintaining Ethereum compatibility. By bridging both EVM and non-EVM chains, Prom is not just enhancing the Ethereum ecosystem, but is fostering a more connected and decentralized multichain environment.

Looking ahead, Prom is set to solidify its position as a leading multichain solution. Key developments include expanding cross-chain compatibility, further enhancing its modular architecture and scaling the Prom DAO governance model to drive long-term, community-driven innovation. 

With an already vibrant ecosystem, strategic partnerships and a focus on real-world use cases, Prom is poised to leave its mark in the blockchain space, offering practical applications across DeFi, GameFi and beyond.

Beginner

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Prom: A zkEVM Layer 2 Multichain Platform

Discover the evolution from PARSIQ to Reactive Network, featuring RSCs—automated, cross-chain smart contracts that revolutionize blockchain automation.

The siloed nature of blockchain networks continues to hamper broader adoption of the technology. Many cross-chain 

 solutions have flooded the market in a rush to address this infamously well-known limitation of decentralized networks. However, manual bridging of assets from one network to another is still highly inefficient and costly.

Another drawback of modern blockchains is the functional limitation of 

 residing on them. Although smart contracts are capable of fairly sophisticated functionality, they need direct input from users in order for their code to execute. In other words, true automated reactivity isn’t part of their default behavior.

Reactive Network (REACT) is a blockchain initiative that aims to address both of these fundamental limitations. Acting as an 

 (EVM) – compatible execution layer, Reactive Network can support 

 (RSCs) — bits of programming code on blockchain that can listen to on-chain events and execute actions as a response to them. Importantly, Reactive's RSCs can do so across multiple blockchains, delivering true automated cross-chain responsiveness.

In its testnet mode as of early January 2025, Reactive Network traces its origins to an earlier blockchain project, PARSIQ (PRQ), founded in 2018 as a provider of 

 data monitoring and intelligence solutions. In early 2024, the PARSIQ team redirected its efforts to develop the Reactive Network platform, shifting focus from blockchain data solutions to cross-chain RSCs. 

Reactive isn’t just an EVM-based cross-chain project: it’s the first platform to widely implement RSCs, truly automated and responsive smart contracts. As such, the potential impact of this new project is nothing short of revolutionary for the entire blockchain industry.

In 2018, three blockchain entrepreneurs — Tom Tirman, Andre Kalinowski and Martin Best — founded the PARSIQ (PRQ) project to address the increasingly complex data management and analytics needs of web3 platforms. PARSIQ’s team launched the project’s first full-scale version in 2020, and in June 2021, its mainnet version went live.

PARSIQ’s data primarily targets web3 developers, providing a set of fundamental and advanced APIs to help web3 businesses integrate data monitoring and analytics services. The platform’s fundamentals include APIs for data logs, transaction blocks, individual transactions, smart contracts and intra-blockchain transfers. There are also advanced APIs for data on 

 (NFTs), address balances and real-time event notifications.

PARSIQ's customers are charged for accessing and querying data via the project's APIs in a standardized way via so-called computational units (CUs). These CUs are calculated based on the complexity of data queries and the blockchain network being accessed.

The platform's native token, PRQ, was launched with three key functions: payment for access to PARSIQ's data services, on-chain governance and staking.

In early 2024, the PARSIQ team announced Reactive Network, a platform featuring a truly groundbreaking innovation: RSCs. The PRQ token would eventually be migrated to Reactive Network's REACT token, marking a complete shift to the new initiative and indicating a possible retirement of the PARSIQ project.

 (REACT) is a decentralized protocol that powers RSCs across multiple EVM-compatible blockchains. The project's testnet was launched in April 2024, and as of mid-January 2025, its mainnet has yet to be launched.

Reactive’s execution layer hosts reactive smart contracts (RSCs), a variation of smart contract technology with one important distinction: RSCs are capable of listening to on-chain events across different networks and reacting to these events by executing predefined actions. This is a significant improvement over standard blockchain smart contracts, which require user input in order for the contracts’ code to execute.

Reactive Network and its RSCs create a plethora of innovative use cases across different web3 verticals. One area is 

 (DeFi), in which these contracts can support automated trading strategies and real-time asset monitoring. Dynamic NFTs — particularly within gaming environments — are another promising application of the technology. For instance, gaming NFTs’ properties could be modified, e.g., upgraded to new levels, in real time in unison with the players’ achievements.

On-chain governance voting and implementation can also benefit from the integration of RSCs. As a platform’s governance community casts their votes and the number of votes achieves certain quotas, predefined platform rule changes built into RSCs can be executed automatically. Further application areas may also include supply chain management and fraud detection. In essence, RSCs might be applicable in any environment in which standard smart contracts operate, but with the added benefit of better automation and autonomous execution.

A key advantage of RSCs is that they’re not limited to a single blockchain environment. Reactive’s RSCs can trigger automated actions across different blockchains, something that’s painfully difficult with standard smart contracts: just ask any blockchain programmer who’s worked on a typical project that required interoperability between two or more platforms.

Thanks to Reactive’s RSCs, developers can now build and launch self-adapting 

 (DApps), complete solutions and protocols that adjust their behavior and execution patterns based on real-time monitoring of on-chain events.

Reactive Network’s EVM-compatible execution layer employs parallelized processing to achieve high throughput and lower the computation load required to execute RSCs. Reactive's RSCs operate in two kinds of blockchain environments: origin chains and destination chains. An origin chain is where a certain event that RSCs listen to occurs, while a destination chain is a blockchain where RSCs make the necessary state changes based on an event. As such, Reactive Network supports the execution of actions on a chain different from the one on which the event trigger originated.

The table below indicates which platforms can act as origins and destinations for Reactive Network’s RSCs, and the Ethereum Sepolia entry at the top is one of the most popular testnets of the 

Reactive’s RSC technology is based on a software design principle called 

 (IoC). In its essence, IoC transfers the control of a program’s execution flow to an external environment or system. Instead of executing functions based on internal specifications, the program calls external objects or functions and executes code based on the inputs from these external sources.

With standard smart contracts, the programming code is executed when users — such as individuals controlling their wallets or bots — interact with the contract, triggering some action specified in the code. Unlike traditional smart contracts, RSCs invert this control flow and automatically execute their code based on external events occurring on blockchains. Instead of being driven by users and blockchain bots, RSCs drive actions autonomously.

As noted above, Reactive Network’s RSCs can process and execute actions across different origin and destination chains. Relayer Network, a decentralized network of relayer nodes responsible for transmitting event data across blockchains, supports the platform's ability to process these cross-chain activities.

RSCs, the core innovative feature of Reactive Network’s platform, possess the unique ability to react to on-chain events and execute programming code automatically, without input from a user, bot or DApp. They can also operate seamlessly across multiple chains, which enables sophisticated cross-chain executions.

Reactive Network can be described as the pioneer of this kind of blockchain technology.

 (LINK) is often considered the first project to implement a high degree of smart contract automation via its Chainlink Keepers network, Keepers rely on a mix of off-chain and on-chain infrastructure to support blockchain oracles. In contrast, Reactive Network's fully on-chain RSCs have a much broader spectrum of use cases in the web3 industry. Some of these include automated trading strategies that respond to market changes in real time, and dynamic NFTs that evolve as a player progresses within games.

 (DEX), in November 2024 is a prime example of how its RSC feature can be used. QuickSwap can integrate the Reactive Network’s RSCs to automate cross-chain liquidity pool workflows.

ReactVM is an EVM-compatible self-contained execution engine designed to power RSCs. Unlike the EVM, ReactVM is capable of parallelized transaction processing. It’s a virtual, machine-like entity in the sense that many of these ReactVMs can be launched by a platform user. Normally, Reactive Network recommends that each RSC be powered by its own instance of ReactVM. Although developers can host multiple RSCs within the same ReactVM instance, this practice is 

Reactive Bridge is a cross-chain bridging solution that’s designed to facilitate the bidirectional transfer of tokens across chains. The bridge, just like the overall platform, uses RSCs to enable efficient asset transfers.

Reactive Network plans to issue its native 

 along with the introduction of its mainnet. REACT is envisioned to support several functions. First, it will be used for the payment of event log processing fees. Reactive Network continually monitors different blockchain events via event logs, which serve as triggers for RSCs. As such, event log processing fees paid by developers, charged in REACT tokens, are a critical revenue source and one element of a sustainable token economy for the project.

Transaction gas fees will also be paid in REACT. Additionally, validators will stake REACT to participate in securing the platform’s 

. REACT will have a total supply of 500 million. Its initial supply upon launch will be 310,256,872 (to match the current circulating supply of PARSIQ’s PRQ token). The project will support the seamless migration of PRQ tokens to REACT at a fixed ratio of 1:1.

Reactive Network is the first major initiative to deliver true automation to blockchain smart contracts. Additionally, its cross-chain nature will allow more networks to adopt this innovative feature. Popular networks like Ethereum (ETH), 

 (ARB) (along with a number of smaller platforms) are already within Reactive Network's reach. As the project develops, we can expect the expansion of RSC functionality to more blockchain networks. However all eyes are now set on Reactive Network's much-anticipated mainnet launch that will herald the arrival of a new generation of DApps 

 self-adapting, proactive and responsive at levels we haven't yet witnessed.

Advanced

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From PRQ to REACT: Exploring PARSIQ’s Evolution to Reactive Network

Vitalik Buterin announced ongoing changes to the Ethereum Foundation's leadership structure.

Daily Top Performer — Official Trump (TRUMP)

The S&P 500 rose 2.9% last week, boosted by strong earnings and softer inflation. Markets now await Trump’s policy announcements on tariffs, taxes, and more. Gold dipped to $2,695 as a stronger USD weighed on prices ahead of Trump’s inauguration. Coindesk Indices, an index measuring broader cryptocurrency market performance was down by 5.31%, with Bitcoin dropping by 0.18% and Ether rising by 0.89%, in the past 24 hours. Trade these markets and more with up to 500x leverage on Bybit MT5 using this 

Today's top performer is TRUMP, which surged 81.6% following the launch of the TRUMP memecoin amid the inauguration.

 by Donald Trump in January 2025 ahead of his inauguration, quickly gained attention and marked a shift toward his pro-crypto stance. With most of the supply held by Trump-affiliated entities, ethical concerns have been raised. Critics caution about its speculative nature and potential risks to the legitimacy of cryptocurrency, but its popularity highlights the significant influence of the Trump brand.

Check Out the Latest Prices, Charts, and Data of 

 ongoing changes to the Ethereum Foundation's leadership structure, aiming to enhance technical expertise, improve communication with ecosystem actors, attract fresh talent, support app builders, and reinforce Ethereum's core values like privacy and censorship resistance. He emphasized that the Foundation would not pivot ideologically, lobby regulators, serve vested interests, or become highly centralized.

Between January 13–17, 2025, BTC spot ETF activity showed a net outflow of $87.7M from GBTC, while non-GBTC saw a significant net inflow of $1,950.6M, resulting in an overall weekly inflow of $1,862.9M. Cumulatively, GBTC has experienced a total net outflow of $21,654M, whereas non-GBTC has recorded $59,741M in net inflows, bringing the overall net inflow to $38,087M.

 is now live, offering another chance to qualify for the upcoming airdrop. If you missed Season 1, you can start farming points to participate in Season 2's airdrop by completing free tasks. If you joined Season 1 with an email, make sure to connect an EVM wallet like MetaMask soon.

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Vitalik Buterin Outlines Ethereum Foundation Leadership Changes and Core Values

Bybit Learn

Blockchain

Wonder how decentralized your favorite blockchain is? Make sure to use the Nakamoto coefficient as a way to gauge its degree of decentralization.

If you're interested in blockchain decentralization, you've probably come across a few discussions on the Nakamoto coefficient. This concept might sound very complex, but once you understand it, it's quite simple. Our guide will tell you everything you need to know about the Nakamoto coefficient so you can use it in your financial decisions.

The Nakamoto coefficient measures decentralization and represents the minimum number of nodes required to disrupt the blockchain's network. A high Nakamoto coefficient means that a blockchain is more decentralized.

The Nakamoto coefficient was first formally described in 2017 by former Coinbase CTO Balaji Srinivasan. This measurement is named after Satoshi Nakamoto, the presumed founder of Bitcoin. However, the Nakamoto coefficient isn’t a Bitcoin-only measurement. Instead, a Nakamoto coefficient can be used for analyzing a variety of blockchains.

Srinivasan's initial plan was to find a quantitative way of determining exactly how decentralized any system was. To calculate this, he proposed a method that combined the

. These measurements are generally used to look at inequality and non-uniformity within an economic population, but Srinivasan had the revolutionary idea of applying them to blockchain decentralization concepts. The Nakamoto coefficient is created by combining these inequality measurements with blockchain subsystem analysis.

The Nakamoto score considers how many subsystems a blockchain has, and how many entities you would have to compromise before gaining control of each subsystem. Simply put, a Nakamoto score describes the minimum amount of effort it would take to disrupt any given blockchain. A high coefficient means that a blockchain is harder to disrupt, because it’s more decentralized. Meanwhile, a low coefficient means that a system is heavily centralized, and has a high risk of disruption.

Calculating a Blockchain’s Nakamoto Coefficient

Calculating a Nakamoto coefficient is a little more complicated than just plugging basic numbers into a simple formula. The formal definition of a Nakamoto measurement is the minimum number of entities in a given subsystem that can add up their amounts of proportionate control to take control of the subsystem. There are several different techniques you may need to use when calculating this coefficient. You'll need to select your Nakamoto coefficient formulas based on the sort of situation you want to analyze.

First of all, you need to determine the minimum threshold for takeover. How much of any subsystem is needed in order to sway it? The standard number is 51%. However, the reality is that not all blockchains operate on a system where a simple majority gains control. Some systems might require something like 60% or 75% of the network to be in agreement about altering the system. Unless a score says otherwise, you can assume the Nakamoto coefficient formula uses 51% as its minimum threshold.

Next, you have to consider the ways in which each type of blockchain subsystem can be compromised.

 that any blockchain can be divided into six individual subsystems: Mining, clients, developers, exchanges, nodes and owners. Each one of these subsystems has its own statistical data set you need to consider.

Once you have this individualized information plotted as a Lorenz curve on a graph, you can identify the number of entities it would take to reach a minimum threshold percentage for system disruption. You'll need to find the minimum number of entities whose proportionate control adds up to 51%, or whatever other disruption percentage you set. This number is the Nakamoto coefficient for blockchain decentralization.

We know the Nakamoto coefficient formula can sound a little complicated, so let's take a look at a real-world example to make things simpler. For example, when considering the Nakamoto score for Ethereum dev decentralization, you would start by looking up the number of engineers who have made commits. (

 shows the total number of commits and the number of commits per engineer.) By plotting the number of commits per engineer on a Lorenz curve, if you can see that two engineers alone have made over 51% of all commits, the Nakamoto score for Ethereum devs would be two. This would mean that Ethereum development is heavily centralized.

As you can see, Nakamoto coefficients are a fairly unique concept in blockchain analysis. Compared to other measurements, these coefficients have some very specific pros and cons.

Using the Nakamoto score comes with many helpful perks.

Despite its many benefits, this coefficient does have some downsides.

Nakamoto Coefficient Among Popular Blockchains

So how do popular blockchains measure up? Here are some revealing things to know about the measurements for some well-known blockchains.

 tends to have the highest Nakamoto score. Its measurements — e.g., for developer, owner and validator — are significantly higher than for most other blockchains. This makes Bitcoin one of the most decentralized blockchains overall. For example, Bitcoin has 14,409 validators and scores a

, while most blockchains score lower than 15.

 was actually one of the first cryptos to popularize the idea of the Nakamoto coefficient. The measurement was brought up frequently by users, who claimed the blockchain was reasonably centralized. If you look at the total number of validators, Solana does have a decent Nakamoto coefficient of 19. It scores particularly well at things like mining pools. However, when you consider measurements for nodes and owners, Solana has fairly poor scores for blockchain decentralization.

 tends to rank consistently high across multiple Nakamoto coefficient measures. It has a score of 26 for the total number of validators, and its various subsystems get high scores as well. This comes as no surprise to supporters of Avalanche. From the start, this blockchain's priority has been decentralization. As Nakamoto score analysis shows, Avalanche is the most decentralized 

 is tricky enough to require its own separate article. Ethereum has such a large network size that its total number of validators cannot be determined. However, some blockchain experts have managed to look at Nakamoto scores for smaller subsystems of Ethereum. When it comes to things like developer decentralization and owner decentralization, Ethereum tends to have low-to-moderate scores. However, it does excel at providing a decentralized node network. Ethereum actually scores higher than Bitcoin when you consider node distribution.

The Nakamoto coefficient is certainly one of the most useful methods for measuring blockchain decentralization. Most other measurements just determine whether a blockchain is either centralized or decentralized. Meanwhile, the Nakamoto coefficient shows that blockchain decentralization is on a continuum. It can determine precisely how decentralized any given chain is. Furthermore, it can help to identify a blockchain's strengths and weaknesses so that you can more easily find decentralized blockchains.

The Nakamoto coefficient can be handy, but it does have some faults. To get the most out of this measurement, you need to take the time to really analyze it. You can't simply read that "Blockchain A has a higher Nakamoto coefficient than Blockchain B" and automatically assume that Blockchain A is therefore more decentralized. A lot of different factors go into any given Nakamoto score.

To work with the Nakamoto measurement, you need to take a close look at which blockchain subsystem it’s evaluating. Keep in mind that there are multiple ways in which any blockchain can be decentralized. Even if a blockchain scores well for a specific type of decentralization, another one of its more important systems might be centralized. You also need to take the time to discover what data set was being used. Some Nakamoto scores are calculated over short periods of time, or with a very broad set of users, rendering these blockchain decentralization scores less reliable.

The Nakamoto coefficient is very helpful as long as you take the time to analyze the data behind any given Nakamoto score. By using a Nakamoto score to analyze subsystems, you can easily rank various blockchains based on their level of centralization. This makes the Nakamoto coefficient one of the most useful tools for determining blockchain decentralization.

Nakamoto Coefficient: An Accurate Indicator for Blockchain Decentralization?

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