\$ n \$ flip-flops can represent \$ 2^n \$ states. Thus the number of bits needed to represent all the states will be the number of flip-flops needed to implement that state machine. So for this state diagram, 4 flip-flops are needed. However through state reduction techniques like row matching method, successive partitioning method, implication chart, and state assignment/encoding techniques, no. of states (and no.of bits/state) to implement a state machine can be reduced. Consequently no. of flip-flops needed are reduced.

\$ n \$ flip-flops can represent \$ 2^n \$ states. The number of bits needed to represent all the states will be the number of flip-flops needed to implement that state machine. So for this state diagram, 4 flip-flops are needed because one of the states is 1001, which needs 4 bits. However through state reduction techniques like row matching method, successive partitioning method, implication chart, and state assignment/encoding techniques, no. of states (and no.of bits/state) to implement a state machine can be reduced. Consequently no. of flip-flops needed are reduced.