Gini Coefficient in Crypto

The Gini coefficient is a statistical measure of economic inequality, originally used to analyze income distribution, now applied to blockchain wallet balances. In the context of cryptocurrencies, it quantifies how tokens are distributed across all active addresses within a network.

A Gini coefficient of zero represents perfect equality, where every wallet holds the same amount, while a value of one indicates extreme concentration. High coefficients in a digital asset often signal that a large portion of the supply is held by a few entities, which increases the risk of market manipulation.

Monitoring this metric over time allows researchers to see if a token is becoming more decentralized as it matures or if wealth is clustering. It is a critical component of risk assessment for protocols that rely on token-based governance, as concentration can lead to plutocratic control.