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

The operating company behind the Kadena blockchain, Kadena Organization, announced its shutdown on October 21. Its announcement was formal, calm, yet painfully succinct.

The company expressed gratitude to the community, mentioning that the “market environment” is the reason for the suspension and confirming that it will immediately cease all business activities and Blockchain maintenance work.

In the last notification from platform X (formerly Twitter), the team reminded users: Since miners will continue to maintain network security and the code will remain open source, this Blockchain technology layer will still persist.

However, beneath this technical layer of “continuation” lies a harsher reality: Kadena's economic vitality and community foundation no longer exist.

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

In this process, those that have never achieved “Product-Market Fit” (PMF), have not formed a specialized positioning, and have not developed attractive supporting applications at the infrastructure layer will gradually exit the market.

The Road to Desperation

Kadena's starting point combines “industry background” and “grand vision”.

The project was founded by former JPMorgan engineers Stuart Popejoy and William Martino, and promised to provide functionalities that Ethereum could not achieve at the time of its launch in 2018, such as high throughput proof of work (PoW) smart contracts through a system called “Braided Chains.”

Its proprietary programming language Pact focuses on “human-readable code” and “formal verification”, aiming to position Kadena as a “blockchain network that combines security and scalability.”

But “the lack of user-adopted innovation is ultimately just an unfinished story”.

Kadena launched its mainnet in 2019, establishing a limited-scale developer ecosystem. According to CoinMarketCap data, its valuation once approached $4 billion in 2021, but then it plummeted by over 99% from its peak.

During this period, only a few mainstream decentralized applications like Babena emerged in the Kadena ecosystem, and the total value locked (TVL) of Babena peaked at only 8 million dollars.

At the same time, liquidity continues to flow towards ecosystems that are more attractive to users, first to Ethereum, Solana, and then to Layer 2 networks like Base, which are 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 as well as the development of projects within its ecosystem have also been struggling.

This phenomenon reveals the core contradiction behind Kadena's shutdown: there is a serious mismatch between supply and demand in the current cryptocurrency economy.

Since 2021, venture capital has injected billions of dollars into the fields of “modular first-layer networks”, “second-layer networks” and “Rollups”, all of which promise to solve the issues of “scalability”, “decentralization” or “transaction costs”.

However, the actual user market size has hardly grown.

According to data from L2Beat and DeFiLlama, there are currently over 100 rolling upgrade projects and more than 200 independent chains operating across various ecosystems (from Ethereum fork chains to Cosmos-based application chains).

But the vast majority of daily active users (DAU) are less than 2000.

The reason is simple: they are all competing for the same group of participants, including traders, yield farmers, and liquidity providers, but have failed to provide any new value.

Startup developer Greg Tomaselli succinctly summarized this situation: “A blockchain network without a clear value proposition and broad application scenarios is ultimately doomed to fail.”

The Illusion of Differentiation

The collapse of Kadena has revealed an uncomfortable truth that the industry is unwilling to face: technological novelty does not equate to “product-market fit”.

Almost every new blockchain claims to solve the problems of “scalability”, “latency”, or “Gas fee efficiency”.

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

Like many “ambitious Layer 1 networks”, Kadena attempts to differentiate itself through “performance metrics”, providing high throughput while maintaining the security of proof-of-work with its chain architecture.

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

Once the network can process thousands of transactions per second, the core of “differentiation” will shift from “operational speed” to “operational purpose.”

The success of Ethereum does not stem from being the “fastest”, but because it has become the “default ecosystem” for tokens, decentralized autonomous organizations (DAOs), and decentralized finance (DeFi) protocols; the rise of Solana is attributed to its cultivation of high-frequency trading and social application scenarios.

Like projects such as Kadena and EOS, it has never clearly defined its core positioning other than “better than existing chains.”

This logic of “building the blockchain first and waiting for the market later” is the core of the infrastructure bubble, each new chain is chasing the “imagined demand”, while users continue to concentrate on ecosystems that “possess liquidity and community culture”.

The final result is: hundreds of “technically feasible but economically irrelevant” networks rely on inertia to maintain operation, gradually heading towards extinction.

Era of Specialization

In addition, the rise of the second layer network of the Ethereum ecosystem and the consolidation of its 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 Layer 1 networks with considerable market capitalization” were launched before the Ethereum “Dencun Upgrade.”

The upgrade significantly improved the scalability of Ethereum and reduced the transaction costs of second-layer solutions.

He believes that this upgrade has rendered the “so-called first-layer premium” of these alternative chains completely ineffective, essentially becoming a relic from the “era before Ethereum's second-layer scalability.”

AminCad stated: “Nowadays, from the perspective of 'scalability', there is no reason to choose 'launching as an alternative first-layer network' over 'a second-layer network with Ethereum as the settlement layer'. Therefore, there is no evidence that newly launched chains can gain any premium through a 'single-layer architecture'.”

He also mentioned that the second layer blockchain based on Ethereum as a long-term settlement layer has operational costs about 99% lower than that of an “independent alternative first layer network”.

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

Successful blockchains no longer position themselves as “universal platforms”, but as “digital economies focused on specific verticals”.

For example, Plasma and first-layer networks like TRON focus on “global stablecoin payments,” providing instant transfers, extremely low fees, and full EVM compatibility.

The competitive advantage of these chains is not “universal throughput”, but “occupying niche tracks”.

Its differentiated core lies in “practicality and narrative,” rather than merely “architecture.” In contrast, Kadena has neither.

This transformation marks the industry's entry into a “more mature stage”: from “technological vanity” to “economic gravity”.

Therefore, the chains that can survive in the “upcoming wave of integration” must possess the following characteristics: “sustained demand” that attracts real users, stable transaction volume, and a value cycle that “can prove the value of its own Block space”.

Upcoming Integration

Kadena's failure signals the future direction of the cryptocurrency “overbuilt infrastructure layer”. The market cannot support the current situation where “hundreds of chains compete for the same pool of liquidity and developer resources”.

In past cycles, “frenzied capital” masked inefficiencies in the industry, with venture funds incubating dozens of first-layer network projects, assuming that each project could find a niche market.

But “liquidity is not unlimited”, users tend to prefer options with “higher convenience”.

In the coming years, “integration” will replace “expansion”: some networks will merge or interoperate through “shared sorters” or “modular frameworks”; others will quietly fade away, leaving only traces in GitHub archives.

Only those networks that “have a clear vertical domain positioning” (such as gaming, social, real-world assets (RWA), institutional finance) can survive as “independent ecosystems.”

This logic is similar to the early internet: there were once dozens of protocols competing for dominance, but in the end, only a few protocols like HTTP and DNS became the “universal standards,” while the rest were quietly eliminated.

Nowadays, the cryptocurrency industry is entering its own “elimination phase”.

For developers, this means that “vanity chains” will be reduced, and more “composable infrastructure” will be built on top of the “verified ecosystem.”

For investors, this is a reminder: “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.”