What is Decentralization Ratio?

In this post, we will study the topic “what is decentralization ratio?”. We will also look into the meaning of decentralization ratio, decentralized market, democratic decentralization, Nakamoto coefficient, etc. There is a ratio between decentralized indirect asset value and total supply of stable coin. This feature is what we call Decentralization Ratio (DR).

Meaning of Decentralization Ratio

The DR records all the parts of collateral handled by code of conducts apart from the components of system contracts. It helps to analyze how risky an asset can be by calculating its ratio.

When government officials freeze assets or KYC that were compelled, they are said to have taken off-chain risks. The transfer of USDC to exchanges that doesn’t support KYC  banned by SEC is also an off-chain risk. Another example is the risk incurred base currencies of those respective assets. However, Ethereum, CVX and CRV are said to be completely decentralized.  The DR can also store any off-chain risk encountered by stablecoins. Any asset, fiat coins or security with high level of this risk is centralized.

There are ways of measuring decentralization ratio liquidity provider tokens. Let’s consider that of FRAX3CRV LP token. It consists of equal amount FRAX and 3CRV in the ratio of 50:50. Since FRAX is dependent in terms of backup, it’s portion is not considered. The other portion of 3CRV contains USDC, USDT and DAI in equal proportion of 33:33:33 respectively. USDC has 100%fiat coin, USDT has 100% fiat and DAI has 60% fiat coins. Therefore, each $1 of FRAX3CRV LP token has around $0.066 ($1 x 0.5 x 0.33 x 0.4) or 6.6% worth of value according to decentralized sources.

Explanation of Decentralization

Decentralization  is the transfer of decision-making power from a central entity to a sub-central group of people.

Determination of Decentralization

There are ways to determine decentralization in terms of making decisions. The are :

  • The level of how needed the operations of the government under the central government are.
  • The freedom granted to the sub-central government by their legal entity.
  • The potential of public expenses.

Meaning of decentralization 1

Generally, it is passing down of power from a higher level to a lower one.

Examples of Decentralization 1

A hotel is in a better position to serve as an example. However, one person cannot control it . It has various headquarters. supermarket, dress showrooms and so on can also be included in the list.

Decentralization in Crypto terms

An authority can convey information to shared networks by either an individual or group of people. The know this as decentralization.

Ways to Decentralize Cryptocurrency

Consistently, people want know the possibility to decentralize cryptocurrency. Here is what you need to know. Anything governed by a group of members with a law that favors majority is decentralized. For instance, the more people invest in bitcoin, the higher the price.

Definition of Democratic Decentralization

There is a relationship between the central government, local government and citizens of a country. When they maintain his relationship , we call it democratic decentralization.

Importance of Decentralization

The less privileged enjoy more freedom because of decentralization. Those that assist them perform their duties to favor their group. Meanwhile, anyone can grow a decentralized community with revenues recovered from improved productivity.

Number of decentralized nodes

The idea of decentralization is proportional. However, you can do the calculation of decentralization on a scale with logarithm. In terms of decentralization, a network with 1 million nodes works the same way as the one with 1 billion nodes.

Meaning of Decentralized Market

So, in a decentralized market, there is a digital technology that gives direct access to individuals that buy and sell securities. For instance, in real estate, buyers and sellers directly interact with each other.

Definition of Nakamoto Coefficient

There is a certain number of nodes merge to disorganize the operations of any blockchain. Generally, people know this number as the Nakamoto Coefficient.

Decentralization in Government terms

Decentralization is therefore , the act of transferring power from the union and state governments to local governments.


This article, however talks about decentralization ratio. I believe you understood all about it. You can still carry out more research to gather more informations. In conclusion, study more on, “meaning of decentralization ratio “, “decentralized market “, “democratic decentralization “, “Nakamoto coefficient “, etc

See the List of things to learn.
  1. Blockchain Technology
  2. Defi
  3. NFTs
  4. DAOs
  5. Crypto
  6. Web 3.0
  7. Altcoin Tokenomics
  8. Metaverse
  9. Smart Contracts

Leave a Comment