From $4B peak to shutdown: What Kadena’s fall teaches other L1 blockchains

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

The firm thanked its group, cited “market situations,” and confirmed that it could stop all enterprise exercise and upkeep of the blockchain instantly.

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

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

The venture’s demise isn’t an remoted failure. Instead, 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 purposes to maintain them.

The freeway to nowhere

Kadena started with pedigree and ambition.

Founded 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 via 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.

However, 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 practically $4 billion in 2021, in accordance to CoinMarketCap data, earlier than collapsing greater than 99% from its highs.

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

Instead, liquidity drifted towards ecosystems with denser consumer gravity, like Ethereum and Solana, and later, the Layer-2 rollups like Base that had been constructed instantly atop them.

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

This exhibits that Kadena’s shutdown exposes a elementary 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. Yet the marketplace for precise customers has barely grown.

According to L2Beat and DeFiLlama, over 100 rollups and greater than 200 sovereign chains are working throughout varied ecosystems, from Ethereum clones to Cosmos-based appchains. However, most of them appeal to fewer than 2,000 each day energetic customers.

The cause is straightforward: they’re all chasing the identical pool of members, 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 finally fail.

The phantasm of differentiation

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

Every new blockchain claims to clear up scalability, latency, or fuel effectivity issues. Yet 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 stand aside via efficiency metrics. Its braided chain structure supplied high throughput whereas sustaining proof-of-work safety.

However, efficiency is a commodity in crypto. Once 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 turned the default environment for tokens, DAOs, and DeFi protocols. Solana’s success stems from cultivating high-frequency trading activities and social applications.

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

However, such strikes are the guts of the infrastructure bubble of chains chasing imaginary demand. Each 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

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

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

According to 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:

“Today, there isn’t any scalability-based argument for opting to launch a sequence 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 unbiased alt-L1.

At the identical time, the market is rewarding specialization over generalization. Successful blockchains are now not positioning themselves as common platforms however as targeted digital economies serving clear verticals.

For occasion, layer-1 networks such as Plasma and TRON are optimized for global stablecoin payments, 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, against this, had neither.

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

As a outcome, the chains that endure the approaching consolidation will likely be those who appeal to real, recurring demand of actual customers, constant transactions, and worth loops that justify their block house.

The coming consolidation

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

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

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

However, solely these with sturdy vertical identities, gaming, social, real-world assets (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, turned common. The relaxation had been quietly deprecated. Crypto is now coming into its personal deprecation section.

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

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

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