Kadena exit highlights blockchain network’s shift to specialization

When Kadena Group, the corporate behind the Kadena blockchain, introduced it was shutting down operations on Oct. 21, the message was formal, quiet, and devastatingly easy.

The corporate thanked its neighborhood, cited “market situations,” and confirmed that it might stop all enterprise exercise and upkeep of the blockchain instantly.

In a remaining note on X, the staff reminded customers that the blockchain would reside on as miners would nonetheless safe it, and the code would stay open-source.

But beneath that technical continuity lies a more durable reality that Kadena’s financial and social lifeblood was gone.

The challenge’s demise just isn’t an remoted failure. As a substitute, it’s a part of a deeper structural correction in crypto, the place the market will witness a gradual extinction of infrastructure layers that by no means discovered product–market match, by no means specialised, and by no means constructed compelling functions to maintain them.

The freeway to nowhere

Kadena started with pedigree and ambition.

Based by former JPMorgan engineers, Stuart Popejoy and William Martino, the community promised to ship options that Ethereum couldn’t in 2018. together with high-throughput, proof-of-work sensible contracts by a system referred to as “braided chains.”

Its proprietary 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 watched its token’s valuation at almost $4 billion in 2021, based on CoinMarketCap data, earlier than collapsing greater than 99% from its highs.

Throughout this era, only some mainstream decentralized functions like Babena, whose complete worth locked peaked at simply $8 million, emerged on Kadena.

As a substitute, liquidity drifted towards ecosystems with denser person gravity, like Ethereum and Solana, and later, the Layer-2 rollups like Base that have been constructed immediately atop them.

Crypto researcher Noveleader pointed out that Kadena has struggled to match Ethereum’s Digital Machine (EVM) dominance over time and has all the time struggled with the value motion of its token, KDA, and the ecosystem initiatives.

This exhibits that Kadena’s shutdown exposes a basic mismatch in right now’s crypto economic system. Since 2021, enterprise capital has poured billions into “modular” Layer-1s, Layer-2s, and rollups that promise to repair scaling, decentralization, or transaction prices. But the marketplace for precise customers has barely grown.

In accordance with L2Beat and DeFiLlama, over 100 rollups and greater than 200 sovereign chains are working throughout varied ecosystems, from Ethereum clones to Cosmos-based appchains. Nonetheless, most of them appeal to fewer than 2,000 day by day lively customers.

The reason being easy: they’re all chasing the identical pool of contributors, together with merchants, yield farmers, and liquidity suppliers, with out providing new worth.

Greg Tomaselli, a startup builder, completely summarized the scenario by pointing out that blockchain networks with no “worth proposition and widespread use” would ultimately fail.

The phantasm of differentiation

Kadena’s collapse exposes a reality the trade prefers to disregard: technical novelty doesn’t equal product-market match.

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

Like many Layer-1 hopefuls, Kadena tried to face aside by efficiency metrics. Its braided chain structure provided 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, differentiation 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 default setting for tokens, DAOs, and DeFi protocols. Solana’s success stems from cultivating high-frequency buying and selling actions and social functions.

Like EOS, Kadena by no means outlined its objective past being “a greater blockchain” to those ones.

Nonetheless, such strikes are the guts of the infrastructure bubble of chains chasing imaginary demand. Every new rollout repeats the logic of constructing first and hoping the market follows, whereas customers consolidate round ecosystems with liquidity and tradition.

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

The period of specialization

Furthermore, the rise of layer-2 networks constructed on Ethereum and the blockchain’s increasing dominance have fully rewritten the playbook for infrastructure design.

AminCad, a serious participant inside the Ethereum ecosystem, pointed out that just about all main different Layer-1 networks with substantial market capitalizations have been launched earlier than Ethereum’s Dencun improve, which improved the community’s scalability and lowered transaction charges for Layer-2 options.

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

He mentioned:

“At this time, there isn’t any scalability-based argument for opting to launch a series as an alt-L1 as a substitute of a dual-layer chain that makes use of Ethereum as its settlement ledger (i.e. an L2), so there’s no proof newly launched chains will derive a premium from launching as a single layer chain.”

AminCad additionally noted {that a} layer-2 blockchain leveraging Ethereum as its long-term settlement ledger operates with roughly 99% decrease prices than an impartial alt-L1.

On the similar time, the market is rewarding specialization over generalization. Profitable blockchains are not positioning themselves as common platforms however as centered digital economies serving clear verticals.

As an illustration, layer-1 networks resembling Plasma and TRON are optimized for international stablecoin funds, providing on the spot transfers, minimal charges, and full EVM compatibility.

These chains compete not on generic throughput however on the aim of proudly owning a distinct segment. Their differentiation lies in utility and story, not simply structure. Kadena, in contrast, had neither.

This shift marks a broader maturation of the trade and a transfer away from engineering self-importance towards financial gravity.

Consequently, the chains that endure the approaching consolidation will likely be people who appeal to real, recurring demand of actual customers, constant transactions, and worth loops that justify their block area.

The approaching consolidation

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

In earlier cycles, exuberant capital masked inefficiency. Enterprise funds seeded dozens of Layer-1 experiments, assuming that every would discover its area of interest. However liquidity just isn’t infinite, and customers gravitate towards comfort.

Over the subsequent few years, consolidation will exchange proliferation. Some networks will merge or interoperate by shared sequencers or modular frameworks; others will merely fade into GitHub archives.

Nonetheless, solely these with sturdy vertical identities, gaming, social, real-world belongings (RWA), or institutional finance, will survive as standalone ecosystems.

The logic mirrors the early web, the place dozens of protocols as soon as competed for dominance, however only some, like HTTP and DNS, grew to become common. The remaining have been quietly deprecated. Crypto is now getting into its personal deprecation part.

For builders, this may imply fewer self-importance blockchains and extra composable infrastructure constructed atop confirmed ecosystems.

For traders, it’s a reminder that Layer-1 publicity is not a broad wager on innovation however a selective wager on community gravity — the flexibility to draw and retain capital, not simply compute it.