Kadena exit highlights blockchain network’s shift to specialization

When Kadena Group, the corporate behind the Kadena blockchain, introduced it might stop operations on October 21, the message was formal, quiet and devastatingly easy.

The corporate thanked its neighborhood, citing “market circumstances” and confirming that it might instantly stop all enterprise operations and upkeep of the blockchain.

In a ultimate remark on X, the group reminded customers that the blockchain would reside on as a result of miners would nonetheless safe it and the code would stay open-source.

However beneath that technical continuity lies a more durable fact: Kadena’s financial and social lifeline was gone.

The demise of the undertaking is just not an remoted failure. As a substitute, it is a part of a deeper structural correction in crypto, the place the market will witness a gradual extinction of layers of infrastructure that by no means discovered product market match, by no means specialised, and by no means constructed compelling functions to assist it.

The freeway to nowhere

Kadena began with pedigree and ambition.

The community, based by former JPMorgan engineers Stuart Popejoy and William Martino, promised to ship options that Ethereum could not supply in 2018, together with high-throughput good contracts and proof-of-work by way of a system known as “braided chains.”

Its native language, Pact, emphasised human-readable code and formal verification, positioning Kadena as each safe and scalable.

Nonetheless, innovation with out adoption is an unfinished story.

Kadena launched its mainnet in 2019, constructed a modest developer ecosystem, and noticed its token’s valuation attain almost $4 billion in 2021, based on CoinMarketCap factsearlier than collapsing greater than 99% of its highs.

Throughout this era, there are only some mainstream decentralized functions similar to Babenawhose complete locked worth peaked at simply $8 million, appeared on Kadena.

As a substitute, liquidity drifted to higher-gravity ecosystems like Ethereum and Solana, and later to the Layer-2 mixtures like Base that have been constructed immediately on high of them.

Crypto researcher Noleader pointed out that Kadena has struggled to match the dominance of Ethereum’s Digital Machine (EVM) through the years and has at all times struggled with the worth motion of its token, KDA and the ecosystem initiatives.

This exhibits that Kadena’s shutdown exposes a basic mismatch in right now’s crypto financial system. Since 2021, enterprise capital has invested billions in “modular” Layer-1s, Layer-2s and rollups that promise to resolve the price of scale, decentralization or transaction. But the marketplace for precise customers has hardly grown.

In accordance with L2Beat And DeFiLlamathere are over 100 rollups and over 200 sovereign chains working throughout ecosystems, from Ethereum clones to Cosmos-based app chains. Nonetheless, most of them entice lower than 2,000 each day energetic customers.

The reason being easy: all of them prey on the identical group of contributors, together with merchants, yield farmers and liquidity suppliers, with out providing new worth.

Greg Tomaselli, a startup builder, summed up the state of affairs completely with: point out that blockchain networks with out “worth proposition and widespread use” would finally fail.

The phantasm of differentiation

Kadena’s collapse exposes a fact the trade prefers to disregard: technical novelty is just not the identical as product-market match.

Each new blockchain claims to resolve scalability, latency, or gasoline effectivity issues. But few can clarify who truly wants one other chain, whereas most customers are already embedded within the ecosystems of Ethereum, Solana or Binance.

Like many Tier 1 hopefuls, Kadena tried to distinguish herself by way of efficiency metrics. The braided chain structure offered excessive throughput whereas sustaining proof-of-work safety.

Nonetheless, efficiency is a commodity in crypto. As soon as networks can course of hundreds of transactions per second, the excellence shifts from how briskly you run to what you run for.

Ethereum thrived not as a result of it was the quickest, however as a result of it grew to become the usual surroundings for tokens, DAOs, and DeFi protocols. Solana’s success comes from cultivating high-frequency buying and selling and social functions.

Like EOS, Kadena has by no means outlined its goal past being “a greater blockchain” for these blockchains.

Nonetheless, such actions are on the core of the infrastructure bubble of chains chasing imaginary demand. Every new rollout repeats the logic of constructing first and hoping the market follows, as customers consolidate round ecosystems of liquidity and tradition.

This ends in a gradual extinction of a number of hundred technically sound however economically irrelevant networks operating on inertia.

The period of specialization

Moreover, the rise of layer 2 networks constructed on Ethereum and the rising dominance of the blockchain have fully rewritten the infrastructure design playbook.

AminCad, a significant participant inside the Ethereum ecosystem, pointed out that the majority main various Layer-1 networks with substantial market capitalizations have been launched earlier than Ethereum’s Dencun improve, enhancing community scalability and decreasing transaction prices for Layer-2 options.

In accordance with him, the improve has made their “so-called Layer-1 premium” out of date and “largely a holdover from the pre-Ethereum Layer-2 period of scalability.”

He mentioned:

“Right this moment, there isn’t a scalability-based argument for selecting to launch a sequence as an alt-L1 moderately than a two-tier chain that makes use of Ethereum as its settlement ledger (i.e. an L2), so there isn’t a proof that newly launched chains will derive a premium from launching as a single-tier chain.”

AminCad too noted {that a} layer 2 blockchain utilizing Ethereum as its long-term settlement ledger runs at roughly 99% decrease charges than an impartial alt-L1.

On the identical time, the market rewards specialization over generalization. Profitable blockchains now not place themselves as common platforms, however as targeted digital economies that serve clear vertical markets.

For instance, Layer 1 networks similar to Plasma and TRON are optimized for world stablecoin funds and supply instantaneous transfers, minimal charges and full EVM compatibility.

These chains don’t compete on generic throughput, however on the purpose of proudly owning a distinct segment. Their differentiation lies in usability and story, not simply structure. Kadena, alternatively, had neither.

This shift marks a broader maturation of the trade and a shift from technical vainness to financial gravity.

In consequence, the chains that can survive the approaching consolidation might be people who entice actual, recurring demand from actual customers, constant transactions, and worth loops that justify their block area.

The approaching consolidation

Kadena’s failure is a style of what is subsequent for crypto’s overbuilt infrastructure stack. The market can’t maintain a whole bunch of chains competing for a similar liquidity swimming pools and developer consideration.

In earlier cycles, exuberant capital masked inefficiency. Enterprise funds launched dozens of Layer-1 experiments, assuming every would discover its area of interest. However liquidity is just not infinite, and customers have a tendency towards comfort.

Within the coming years, consolidation will substitute proliferation. Some networks will coalesce or collaborate by way of shared sequencers or modular frameworks; others merely disappear into the GitHub archives.

Nonetheless, solely these with a powerful vertical id, gaming, social, real-world belongings (RWA) or institutional funding, will survive as standalone ecosystems.

The logic mirrors the early Web, the place dozens of protocols as soon as vied for dominance however only some, similar to HTTP and DNS, grew to become common. The remaining have been quietly rejected. Crypto is now getting into its personal depreciation section.

For builders, this implies fewer vainness blockchains and a extra configurable infrastructure constructed on high of confirmed ecosystems.

For traders, it is a reminder that Layer 1 publicity is now not a broad wager on innovation, however a selective wager on community gravity: the power to draw and retain capital, not simply calculate it.