From a $4 billion valuation to closure, who will be next after Kadena's collapse?

The Kadena Organization, the operating company behind the Kadena blockchain, announced its shutdown on October 21st in a formal, calm, yet painfully concise announcement. The company thanked the community, cited "market conditions" as the reason for the shutdown, and confirmed that it would immediately cease all business activities and blockchain maintenance. In a final announcement on the X platform (formerly Twitter), the team reminded users that the blockchain will continue to technically survive, as miners will continue to secure the network and the code will remain open source.

However, beneath this technical "survival" lies a harsher reality: Kadena's economic vitality and community foundation are no longer there.

Kadena's shutdown is not an isolated failure, but part of a deeper structural adjustment in the cryptocurrency industry.

In this process, those infrastructure layers that have never achieved "product-market fit" (PMF), never formed a professional positioning, and never developed attractive supporting applications will gradually exit the market.

The Road to a Desperate Situation

Kadena's starting point is both "industry background" and "grand vision".

The project was founded by former JPMorgan engineers Stuart Popejoy and William Martino. When it was launched in 2018, it promised to provide features that Ethereum could not achieve at the time, such as high-throughput Proof-of-Work (PoW) smart contracts through a system called "

"

Its proprietary programming language, Pact, features "human-readable code" and "formal verification," aiming to position Kadena as a blockchain network that offers both security and scalability. However, "innovation without user adoption is ultimately an unfinished story." Kadena launched its mainnet in 2019, building a limited developer ecosystem. According to CoinMarketCap data, its valuation approached $4 billion in 2021, but has since plummeted by more than 99% from its peak. During this period, only a few mainstream decentralized applications such as Babena emerged in the Kadena ecosystem, and Babena's peak total value locked (TVL) was only US$8 million. At the same time, liquidity continued to flow to ecosystems with greater user appeal, first Ethereum and Solana, and then second-layer networks such as Base built directly on Ethereum. Cryptocurrency researcher Noveleader pointed out that for many years, Kadena has failed to shake the dominance of the Ethereum Virtual Machine, and the price trend of its token KDA and the development of projects within the ecosystem have also been difficult. This phenomenon reveals the core contradiction behind Kadena's suspension: in the current cryptocurrency economy, there is a serious mismatch between supply and demand. Since 2021, venture capital has injected billions of dollars into "modular first-layer networks," "second-layer networks," and "Rollups," all of which promise to solve problems of "scalability," "decentralization," or "transaction costs."

However,the actual user market size has barely grown.

According to data from L2Beat and DeFiLlama, there are currently over 100 rolling upgrade projects and over 200 independent chains running in various ecosystems (from Ethereum forks to Cosmos-based application chains).

But the vast majority of them have fewer than 2,000 daily active users (DAU). The reason is simple: they are all competing for the same participants, including traders, yield farmers and liquidity providers, but fail to provide any new value.

Startup developer Greg Tomaselli accurately summarized the situation:

“Blockchain networks without clear value propositions and broad application scenarios will ultimately fail.”

The illusion of differentiation

The collapse of Kadena reveals a truth that the industry is reluctant to face:

Technological novelty does not equal “product-market fit”.

Almost every new blockchain claims to solve the problems of "scalability," "latency," or "gas efficiency."

But few projects can clearly explain: when most users are deeply integrated into the Ethereum, Solana, or Binance ecosystem, who needs a new chain?

Like many "aspiring first-layer networks," Kadena attempts to differentiate itself through "performance metrics." Its chain architecture provides high throughput while maintaining the security of proof-of-work.

But in the cryptocurrency industry, "performance" has long been a "homogeneous commodity."

Once a network can process thousands of transactions per second, the core of "differentiation" shifts from "speed" to "purpose."

Ethereum's success doesn't stem from being "the fastest," but from becoming the "default ecosystem" for tokens, decentralized autonomous organizations (DAOs), and decentralized finance (DeFi) protocols.Solana's rise is due to its fostering of high-frequency trading and social application scenarios. Like projects like EOS, Kadena has never clearly defined its core positioning beyond being "better than existing chains." This "build the chain first, wait for the market later" logic is at the heart of the infrastructure bubble. Each new chain chases "imaginary demand," while users continue to flock to ecosystems with "liquidity and community culture." The end result: hundreds of "technically viable but economically irrelevant" networks, operating on inertia, gradually die out.

The Age of Specialization

Furthermore, the rise of second-layer networks in the Ethereum ecosystem and the consolidation of their dominant position have completely rewritten the "rules of the game" for infrastructure design.

AminCad, a core participant in the Ethereum ecosystem, pointed out that almost all "mainstream alternative first-layer networks with significant market capitalization" were launched before Ethereum's "DenCun Upgrade."

This upgrade significantly improved Ethereum's scalability and reduced transaction costs for second-layer solutions. He believes that this upgrade renders the so-called layer-one premium of these alternative chains completely invalid, making it "essentially a relic from the pre-Ethereum layer-two scalability era." AminCad stated: "Today, there is no reason to launch as an alternative layer-one network rather than a layer-two network with Ethereum as the settlement layer from a scalability perspective. Therefore, there is no evidence that newly launched chains can earn any premium by being a single-layer network." He also mentioned that layer-two blockchains using Ethereum as a long-term settlement layer have an operating cost that is approximately 99% lower than "standalone alternative layer-one networks."

At the same time, the market is "rewarding specialization rather than generalization."

Successful blockchains no longer position themselves as "universal platforms," ​​but rather as "digital economies focused on specific verticals."

For example, first-layer networks such as Plasma and TRON focus on "global stablecoin payments," providing instant transfers, extremely low fees, and full EVM compatibility. The competitive advantage of these chains is not "general throughput" but "occupying niche tracks". The core of their differentiation lies in "practicality and narrative" rather than simple "architecture". In contrast, Kadena has neither.

This shift marks the industry entering a "more mature stage":

from "technical vanity" to "economic gravity."

Therefore, chains that can survive the "coming wave of integration" must have the following qualities:

"sustained demand" to attract real users, stable transaction volume, and a value cycle that "can prove the value of its own block space."

Upcoming Integration

Kadena's failure foreshadows the future direction of cryptocurrency's "overbuilt infrastructure layer."The market cannot sustain the current situation of "hundreds of chains competing for the same pool of liquidity and developer resources."

In previous cycles, "frenzied capital" masked industry inefficiencies, and venture funds incubated dozens of first-layer network projects, assuming that each project would find a niche market.

However, “liquidity is not infinite,” and users always prefer “more convenient” options.

In the next few years, “integration” will replace “expansion”: some networks will merge or interoperate through “shared sorters” or “modular frameworks”;

Others will quietly fade into obscurity, leaving only traces in GitHub archives.

Only those networks with “clear vertical positioning” (such as games, social networking, real-world assets (RWA), and institutional finance) can survive as “independent ecosystems.” This logic is similar to that of the early Internet: dozens of protocols once competed for dominance, but in the end only a few protocols such as HTTP and DNS became "universal standards," and the rest were quietly eliminated. Today, the cryptocurrency industry is entering its own "elimination phase." For developers, this means fewer "vanity chains" and more "composable infrastructure" will be built on "proven ecosystems." For investors, this is a reminder that “laying out the first layer of the network” is no longer a “broad bet on innovation”, but a “selective bet on ‘network gravity’”. The core lies in the ability to “attract and retain capital” rather than simply “computing power”.