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Most current-generation P2P content distribution protocols use fine-granularity blocks to distribute content to all the peers in a decentralized fashion. Such protocols often suffer from a significant degree of imbalance in block distributions, especially when the users are highly dynamic. As certain blocks become rare or even unavailable, content availability and download efficiency are adversely affected. Randomized network coding may improve block diversity and availability in P2P networks, as coded blocks are equally innovative and useful to peers. However, the computational complexity of network coding mandates that, in reality, network coding needs to be performed within segments, each containing a subset of blocks. In this paper, we quantitatively evaluate how network coding may improve content availability, block diversity, and download performance in the presence of churn, as the number of blocks in each segment for coding varies. Based on stochastic models and a differential equation approach, we explore the fundamental tradeoff between the resilience gain of network coding to peer dynamics and its inherent coding complexity. We conclude that a small number of blocks in each segment is sufficient to realize the major benefits of network coding, with acceptable coding cost.