While the original Nickel defense utilized 5 defensive backs in conjunction with a 4 man rush, and but 2 linebackers, modern definition calls any formation that utilizes 5 defensive backs (from nickel = 5 cent piece) a Nickel defense. The Nickel defense originated as an innovation of Philadelphia Eagles defensive coach Jerry Williams in 1960 as a measure to defend star Tight End Mike Ditka of the Chicago Bears. The Nickel defense was later plagiarized by then Chicago Bear's assistant George Allen who came up with the name "nickel" and later marketed the idea as his own (Philadelphia Daily News 9/25,1986). The nickel defense was popularized by the Miami Dolphins (Head Coach Don Shula and Defensive Coordinator Bill Arnsparger) in the 1970s and is now commonly employed in obvious passing situations or against a team that frequently uses four wide receiver sets on offense. The defense has 5 defensive backs, and usually has 4 down linemen and 2 linebackers. A lineup of 3 down linemen and 3 linebackers is sometimes used, but this is often called a "3-3-5" defense instead of a "nickel" defense. The 4-2 version of the nickel is more popular because it usually sacrifices less run-stopping ability. Some teams favor the pass more than the run. If a team has a good quarterback and three very good wide receivers, it would be foolish for them to leave a receiver on the bench just because "normal" football alignments include a fullback. Such a team will frequently take their fullback off the field and substitute a third wide receiver, called a slot receiver. This is especially likely if the situation on the field calls for a pass, such as a third and long situation. When a fast wide receiver is put in place for a fullback, this creates a mismatch for the defense. You might expect that the weak side linebacker would cover the third wide receiver, but there is little chance he can successfully do this. A typical linebacker in the NFL weighs around 245 pounds and is trained to deliver big hits whereas the slot receiver is most likely a 185-pound guy who is substantially quicker. The receiver should be able to easily run right by the linebacker and catch an open pass for the first down, so the defense will most likely remove the weak side linebacker from the field and substitute a third cornerback. This player is sometimes called a "nickel back" . The defense now has three cornerbacks and two safeties on the field, for a total of five defensive backs. Since there are five backs, this is called a nickel package. If the defense is against a high percentage passing offense, it is likely that they will start out the game in their nickel package and rarely play their base defense.
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In American football, the two defensive formations, nickel and dime consist of five defensive backs instead of the standard four. The difference between the two formations is that in nickel coverage the extra back lines up on the inside of the left corner back (if you are facing the defense) in dime coverage the extra back lines up on the inside of the right corner back (if you are facing the defense).