Proof-of-Work (PoW) is frequently referred to as a remnant of the past that is being superseded by alternative consensus techniques such as Proof-of-Stake (PoS). The most prevalent objection to PoW blockchains is that they consume too much energy and are too expensive. If you’ve been in crypto long enough, you’ve probably heard this story.
Would you believe me if I told you that there is a Layer-1 PoW blockchain that is not only energy-efficient but also entirely scalable, decentralized, and secure?
Kadena claims to be just like that. Kadena’s token (KDA) has had a meteoric rise in recent months, rising from a market worth of $100 million to $3 billion in just 60 days. Some have even dubbed it an Ethereum killer (yes, every coin seems to call itself that), but Kadena’s founder Stuart Popejoy insists that it is the next generation of smart contract blockchains that will work alongside ETH and BTC, offering true scalability with a proposed transaction rate of 480,000 transactions per second (TPS).
In this study, we’ll examine Kadena in-depth to see whether the claims are accurate if it can work alongside ETH and BTC, and if it is truly The Ethereum Killer.
What exactly is Kadena?
Kadena is a layer-1 proof-of-work blockchain with a proprietary Chainweb chain architecture that allows it to scale indefinitely. It also contains the Kuro layer-2 blockchain, which allows for permission (private) transactions. The native smart contract programming language ‘Pact,’ which is written in Haskell, is used to create both layers.
Kadena’s goal is to be a developer-friendly, massively scalable blockchain with the same level of security as PoW blockchains like Bitcoin. Unlike Bitcoin or Ethereum, Kadena allows users to create smart contracts using a Turing-incomplete programming language (more on this later).
Kadena is designed to appeal to a wide range of consumers, including retail and regular customers, as well as institutional and enterprise users. Kadena’s novel PoW consensus mechanism, Chainweb, appears to have addressed the problematic blockchain trilemma in theory. Given the Kadena team’s illustrious history, this should come as no surprise.
The Team of Kadena
The project was launched in 2016 by Stuart Popejoy and Will Martino, two former members of the JPMorgan blockchain development team for Juno and the SEC’s Cryptocurrency Steering Committee, and has extensive ties to traditional finance.
Dr. Stuart Haber, the co-inventor of the term “blockchain” and the most quoted author in Satoshi Nakamoto’s infamous 2008 Bitcoin white paper, stands out among the team’s advisors like the sun on a hot day.
The creators’ bright vision for Kadena’s future and their mastery of both the legacy financial system and the blockchain ecosystem is particularly remarkable in interviews with Stuart Popejoy and Will Martino. This knowledge aided the founders in designing Kadena to address the faults in both CeFi and Defi.
Architecture of Kadena
The team’s brilliance is demonstrated when examining all of Kadena’s architectural components, namely:
1. A web of chains
Chain web is the team’s layer-1 public blockchain, which allows for infinite scalability in a PoW consensus method. It also refers to the Kadena blockchain’s unique architecture. One of the most common challenges with proof-of-work blockchains is their inability to scale successfully, but Kadena has been able to address this difficulty with Chainweb by incorporating two crucial aspects into its architecture:’sharding’ and ‘braiding.’ So, what exactly does that imply?
The terms’sharding’ and ‘braiding’ allude to the fragmentation of a single blockchain into numerous distinct chains, and each block in a peer chain contains references to the hash of earlier blocks from other peer chains. Simply described, Chainweb is a linked bundle of numerous parallel chains known as “peer chains” that all function together for the same network at the same time.
Scalability — Because each shard is only concerned with a limited fraction of transactions in the entire blockchain, the element of sharding aids with the scalability of the blockchain. As a result, throughput increases since each shard in the chain may process transactions and produce blocks at the same time. The more shards there are in a blockchain, the more transactions it can handle.
When it comes to providing security to these chains, the ‘braiding’ element helps secure the network because each block in the network has the hash of its previous block as well as the hash of previous blocks in other peer chains in the network. This feature lets each block, independent of which shard or chain it comes from, validate other blocks in the network.
As a result, an attacker must take control of more than 51 percent of the total hash power in the entire network, rather than simply one or several specific shards, to harm the network. This secures the network and prevents a single shard attack. Braiding is slightly more difficult to accomplish because of the addition of ‘degrees’ and ‘diameters’ to the Chainweb’s structure.
Chainweb’s network currently includes 20 ‘peer’ chains or shards with a total throughput of 480,000 TPS. One of the most common complaints of proof-of-work blockchains is that they are incredibly energy-intensive. I noted this at the beginning of this essay. Naturally, as Kadena scales and adds more peer chains to its network, the question of whether it can be energy-efficient remains. And the answer is a resounding YES.
Kadena began with a total of 10 peer chains, which was later increased to 20 peer chains in August 2020, and the results demonstrate that the network’s energy usage remained constant even after the number of chains was doubled.
This serves as proof of concept for the blockchain’s ability to scale from 20 peer chains to 1000 peer chains and beyond without consuming the same amount of energy, making the blockchain incredibly energy efficient, especially at scale.
Before introducing its public smart contract platform, Kadena created a private blockchain. The Kadena Kuro (formerly ScalableBFT) private blockchain is an open-source layer-2 blockchain that employs the Byzantine Fault Tolerant (BFT) consensus process and is designed for enterprise use cases.
Kuro is written on the Pact programming language and is designed to help businesses with their blockchain needs. Since 2018, a healthcare consortium has been using Kadena Kuro as a proof of concept to help reduce the work required to gather and keep insurance provider information.
Kuro can be used as a side-chain with a public blockchain network (such as Kadena’s public platform) to accelerate transaction times and create new data marketplaces. This functionality is especially beneficial to businesses that have a large amount of user or market data that can be monetized and sold on a private blockchain.
3. Make a deal
Pact is Kadena’s native open-source smart contract language with bug detection built-in. It is the first Turing-incomplete smart contract language that is completely human-readable. It enables anyone to write on a blockchain in a simple, direct, and secure way. The pact was created to address some of the issues that exist in today’s common smart contract programming languages, such as Ethereum’s solidity.
Because Solidity is a Turing-complete language, it is vulnerable to attacks such as unbounded loops and a lack of Formal Verification. Furthermore, when you use Pact to reference code from other contracts, you retain control over what happens to your transactions, even if their code changes.
Formal Verification (FV) is a Pact feature that allows developers to automatically check for defects or vulnerabilities in their code using mathematical computation. Consider the ‘Formal Verification Tool’ to be the coding equivalent of the ‘Grammarly Tool.’ Formal Verification in Pact is intended to tell you not only whether your smart contract can execute what you planned, but also whether it will conduct no additional actions other than what you wanted.
Pact smart contracts may be updated, altered, or fixed using an update system that allows users to declare new versions of a smart contract that are only applied when the new code has been correctly run, unlike Solidity-based contracts. Any flaws in the smart contracts will cause them to revert to their previous state, preventing any further alterations.
Smart Contract Security — To grasp the concept of ‘Turing Completeness’ in programming languages, we must first grasp the concept of smart contract security while utilizing Pact. ‘Turing Completeness,’ to put it another way, is a programming language’s capacity to define all feasible programs or functions. In non-technical terms, it refers to whether a programming language is all-powerful and boundless in its use for creating all forms of programs according to modern computer standards.
The pact was created to be a Turing-incomplete language, as opposed to Ethereum’s Solidity, which is Turing-complete. While Turing-complete languages are more diversified and powerful in terms of programming capabilities, they also provide bad actors with a larger number of choices for exploiting and attacking a program or code.
The majority of blockchain applications now in use do not necessitate the entire set of capabilities that a Turing-complete language provides. As a result, a Turing-incomplete language like Pact can provide all of the programming capabilities required for most smart contracts, while also making the programs that run on it more secure.
Recursion is one of the essential functions in a Turing-complete program on the blockchain that can lead to several assaults. The capacity of a program to loop an action until a specified condition is fulfilled for it to terminate is referred to as recursion. Any recursion identified in a Turing-incomplete language like Pact will cause an immediate failure and terminate any executing code. This functionality dramatically minimizes the number of possible attack vectors in smart contracts.
Do you recall the DAO attack on Ethereum in 2016? That’s one of the most well-known examples of a smart contract’s-entrance function being used to drain the DAO’s cash before the balance was updated on-chain (thanks to the Turing-complete nature of the programming language).
The KDA Token from Kadena
KDA, Kadena’s native token, is used to pay for computing power on the Kadena blockchain in the same way that ETH is used on the Ethereum blockchain. Similar to Bitcoin’s block reward of BTC for successfully mining a block, miners are likewise given KDA for mining blocks.
The total supply of KDA is 1 billion tokens, with 166,581,608 KDA in supply at the time of writing (i.e 17 percent of the total supply).
1. Token Distribution
Platform Reserve – The platform reserve receives roughly 20% of the entire supply. The Platform Reserve is the project’s treasury, with tokens in the reserve being partially monetized and used to offer services like insurance, smart contract verification, and gas station grants.
Miners – Miners receive approximately 70% of the whole supply. As block rewards for miners, these tokens will be gradually released into supply. Before the block reward pool runs out, the emission rate is expected to last more than 100 years.
Investor/Strategic – Investors/Strategic receive around 6% of the overall supply. These tokens will be distributed for strategic agreements with other projects or ecosystem efforts or will be sold in token sales to investors.
Contributor – ‘Contributors’ receive approximately 3% of the entire supply. Employees, consultants, and advisors are among the contributors. These are essentially tokens designated for the project’s team and contributors.
Burned — During the project’s first launch, around 10 million tokens (1 percent of the total supply) were burned.
2. Schedule of Emissions
Emissions from Mining – The mining pool holds around 700 million tokens (almost 70% of the total supply), which will be put into circulation over time as block rewards are granted to miners for successfully mining a block. The current emission rate is expected to endure for 120 years.
At inception, the block reward was around 2.3 KDA per block or 23.04523 KDA per block height. This amount will decrease by 0.3 percent every 87,600 block heights until block height 95,308,800, at which point the mining reward will remain constant at 1 KDA per block height.
At block height 125,538,057, the block reward will finally drop to zero. As a result, the token economy is halfway between inflationary and deflationary in terms of circulating supply (in terms of purchasing power of the token with successful adoption).
Understanding and calculating the block rewards by looking at their GitHub was a pain for a non-technical individual. If you’re anything like me, don’t worry; I’ll explain. A location in a blockchain is referred to as block height. With each block produced in a typical blockchain, the block height climbs.
In a sharded blockchain like Kadena, however, the block height is calculated as follows: if the network has 20 shards, there will be 20 blocks (one produced by each of the shards/chains) positioned at the same block height at any given block height.
Because there is a fixed reward at each block height, when Kadena scales into a larger number of peer chains, the individual block payouts get smaller and smaller. At every given block height, the KDA incentives must be divided across all of the blocks in that block height.
Emissions from the Platform Reserve — The platform reserve has 200 million tokens (20 percent of the total supply). These are tokens that have been pre-assigned and will be vested over time. The platform reserve was put on a time-locked delayed vesting schedule to prevent inflation while also providing significant economic underpinning to the platform, allowing it to pay and make grants for various activities that will aid its growth.
At the time of writing, the platform is emitting 22.08 million tokens each year and 2 million tokens per month. The team has retained the right to adjust the emission rate in the future if they believe it is in the project’s best interests. The platform reserve tokens will be completely released in ten years, from 2021 to 2030, at the present emission pace.
3. Price History of KDA
Kadena’s token (KDA) has had a meteoric rise in recent months, rising from a market worth of $100 million to $3 billion in just 60 days. In early 2018, Kadena performed two private token sales in the form of a Simple Agreement for Future Tokens (SAFT), with tokens priced between $0.50 and $0.75. Kadena also held a public token sale, with each token selling for $1. With a current price of $9.72, KDA has returned 1,812 percent since its inception.
It reached an all-time low of $0.1213 in January 2021 and an all-time high of $28.25 in November 2021, according to CoinMarketCap. All of this happened in just 11 months! During October and November of 2021, KDA drew the attention of investors in particular. Some speculate that this is due to wrapped KDA’s recent introduction on the Ethereum (ETH) network, as well as Kadena’s deployment of non-fungible token projects, new exchange listings, and KDA staking functionality.
Ecosystem of Kadena
With unique features like a ‘gas station’ and a new native NFT standard, the Kadena ecosystem is fast spreading. It’s also the foundation for several projects in the domains of Defi, DEXs, NFT Marketplaces, and wallets.
1. Petrol Station
Kadena is the first crypto ‘gas station’ service on the blockchain. Gas stations are accounts that reimburse users for any gas used to execute certain smart contracts. The goal of gas stations is to make dApp onboarding easier for consumers by allowing them to try out a dApp without having to go through the trouble of buying native crypto on an exchange and then transferring it to a wallet to enjoy the dApp’s services.
When combined with Pact’s capacity for dApp developers to co-sign transactions and pay for a user’s gas expenditures when using a dApp, petrol stations offer a powerful way for the platform to cover several years of gas prices.
2. DAO Kadena
The name of Kadena’s initial DAO is Dao.init, which is currently in the test net before being released to the main net. As Kadena’s ecosystem grows, the development of a DAO will allow the broader community to provide feedback in a decentralized manner.
The DAO will accomplish two goals: 1) it will let the Kadena community submit and vote on proposals for improving the Kadena environment, and 2) it will establish a decentralized method for adding new features to the Kadena platform.
3. The Kaddex
Kaddex is a Kadena-based decentralized multi-protocol AMM DEX with native decentralized bridges, which is governed by a DAO. Due to Kadena’s ‘gas stations,’ it may offer transactions with no gas fees. Kaddex has its token, KDX, that serves as a governance token for the DAO as well as a utility token for the DEX.
Kaddex offers one-of-a-kind LP incentives to entice new Defi subscribers to join the network. When a swap is completed, the user is charged a regular 0.3 percent trading cost, of which Liquidity Providers receive 100%.
Non-fungible tokens on Kadena, developed with Pact, address a significant flaw in Ethereum’s ERC standards: the lack of extra functionality beyond ‘transfer.’ NFT sales on ethereum markets that involve the function of ‘royalties,’ according to Stuart Popejoy, co-founder of Kadena, are fully in the hands of the marketplace.
In a world that is meant to be constructed on the principle of ‘trust-lessness,’ this generates a need for trust. As a result, even if the sale or transfer takes place outside of an NFT marketplace, Kadena’s native NFT standard allows royalties to be immediately transferred to the creator. This assures that the creator’s claim to royalties from his NFT creation is protected.
Plans for the Future
According to the roadmap, Kadena’s future looks bright. With the release of bridges connecting Kadena to blockchains like Terra, Celo, and Ethereum, the team is ready to go headfirst into broad adoption.
Kadena might also be integrated into the Ledger hardware wallet, according to the team. The team also intends to offer a variety of incentives in the form of grants, such as the developer grant and ambassador programs.
Kadena’s design is truly remarkable, and investors appear to be seeing the platform’s potential. The blockchain trilemma is the first of two fundamental difficulties Kadena has successfully overcome in the blockchain ecosystem. Kadena’s unique Chainweb architecture promises to scale like no other blockchain currently on the market while maintaining decentralization and security. It’s even become energy efficient on a large scale.
The onboarding of institutional and enterprise entities onto the blockchain using Kadena’s revolutionary layer-2 platform, Kuro, appears to be the second key challenge it appears to have overcome. Kadena’s ‘gas station’ functionality allows retail investors and laypeople to connect with dApps created on its blockchain without the need for native utility tokens for gas.
Kadena appears to be closer to bringing blockchain to widespread adoption than any other project on the market, owing to its continuing real-world applicability and financial feasibility.