When it comes to consensus mechanisms, Proof-of-Work (PoW) is often dubbed as a relic of the past that is being replaced with other mechanisms such as Proof-of-Stake (PoS). The most common argument against PoW blockchains is that they are just too energy-intensive and costly. I’m sure you’ve heard this narrative if you’ve been in crypto long enough.
But what if I told you there is a Layer-1 PoW blockchain that’s not only energy-efficient but completely scalable, decentralized, and secure, would you believe me?
That’s exactly what Kadena claims to be. Kadena’s token (KDA) has gone parabolic the past few months, quickly growing from a $100 million market cap to a $3 billion market cap in just 60 days. Some have even gone so far as to call it an Ethereum killer (yes, every coin seems to brand itself as so), but its founder Stuart Popejoy insists that Kadena is the next generation of smart contract blockchains working alongside ETH and BTC, offering true scalability with a proposed 480,000 transactions per second (TPS).
We’re going to take a deep look into Kadena in this review to see if the claims are true, if Kadena can work alongside ETH and BTC, or if it really is The Ethereum Killer.
What is Kadena?
Kadena is a layer-1 proof-of-work blockchain with a proprietary chain architecture called Chainweb that allegedly allows Kadena to scale limitlessly. It also has a layer-2 blockchain called Kuro that allows for permissioned (private) transactions. Both layers are built using the native smart contract programming language called ‘Pact’, which is built in Haskell.
Kadena’s vision is to be a highly scalable and developer-friendly blockchain that offers the same level of security seen in PoW blockchains like Bitcoin. Except, unlike Bitcoin or Ethereum, Kadena offers smart contract functionality even on a Turing-incomplete programming language (more on this later).
Kadena is designed to be appealing and functional for not only retail or regular users but also institutional and enterprise users. Theoretically, Kadena’s innovative PoW consensus mechanism called Chainweb seems to have solved the infamous blockchain trilemma. This should come as no surprise considering the Kadena team’s rich heritage.
The project was founded in 2016 by Stuart Popejoy and Will Martino and has deep ties to traditional finance, with the founders being former members of the JPMorgan blockchain development team for Juno and the SEC’s Cryptocurrency Steering Committee respectively. Among the list of advisors to the team, there is one name that stands out like the sun on a hot day, that is Dr. Stuart Haber, the co-inventor of ‘blockchain’ and the most cited author in Satoshi Nakamoto’s renowned 2008 Bitcoin white paper.
Interviews with both Stuart Popejoy and Will Martino are especially impressive and show the founders’ bright vision for Kadena’s future and their understanding of both the legacy financial system and the blockchain ecosystem. This understanding helped the founders design Kadena to combat the flaws found in both CeFi and DeFi.
The brilliance of the team is displayed when analyzing all the components of Kadena’s architecture, namely:
- Chainweb – the layer-1 public blockchain that provides limitless scalability in a PoW consensus mechanism utilizing an innovative system of ‘braiding’ between multiple parallel ‘peer’ chains.
- Kuro – the layer-2 open-source private blockchain built specifically for eEnterprises providing a speed of 8000 TPS across 500 nodes.
- Pact – the native open-source smart contract programming language created by the Kadena team using Haskell for implementation.
Let’s look at each of these components in more depth.
Chainweb refers to the layer-1 public blockchain developed by the team that provides limitless scalability in a PoW consensus mechanism. It also refers to the unique architecture of the Kadena blockchain. One of the most prevalent problems of a proof-of-work blockchain is its inability to effectively scale, but with Chainweb, Kadena has been able to overcome this particular issue through the incorporation of two key features to its architecture; namely ‘sharding’ and ‘braiding’. Now, what does that mean?
‘Sharding’ refers to the splitting of one blockchain into multiple individual chains and ‘Braiding’ refers to the mechanism in which each block in a peer chain contains references to the hash of the previous blocks from other peer chains. Simply put, Chainweb is an interconnected bundle of multiple parallel chains called ‘peer chains’ that all simultaneously work together for a single network.
Scalability – The element of ‘sharding’ helps in the scalability of the blockchain as each shard is only concerned with a small subset of transactions in the whole blockchain. Therefore, this leads to an increase in throughput as each shard in the chain can simultaneously process transactions and produce blocks. The more shards in the blockchain, the more transactions the blockchain can process.
Security – When it comes to providing security to these chains, the element of ‘braiding’ helps secure the network as each block in the network contains the hash of its previous block as well as the hash of previous blocks in other peer chains of the network. This feature allows each block to validate other blocks in the network, regardless of the particular shard or chain it is from. Therefore, for an attacker to harm the network, he must gain control of over 51% of the total hash power in the complete network instead of just one or several individual shards. This prevents a single shard attack and secures the network. While the implementation of braiding is slightly more complex, with the introduction of ‘degrees’ and ‘diameters’ in the structure of the Chainweb, you can gain a better understanding through Kadena’s educational article on it.
At present, Chainweb has a total of 20 ‘peer’ chains or shards in its network with a throughput of 480,000 TPS. At the beginning of this article, I mentioned that one of the leading criticisms for proof-of-work blockchains is their nature of being extremely energy-intensive. So naturally, the question now remains whether Kadena can be energy-efficient as it scales further and adds more peer chains in its network. And the answer to this is YES.
Kadena initially launched with a total of 10 peer chains, which later scaled to 20 peer chains in Aug 2020, and the results show that the energy consumption of the network remained the same even after doubling the number of chains on the network. This acts as a proof of concept for the blockchain’s ability to scale from 20 chains up to 1000 peer chains and more while using the same amount of energy to run the network, making the blockchain extremely energy efficient, especially at scale.
Kadena also developed a private blockchain before launching its public smart contract platform. The Kadena Kuro (previously ScalableBFT) private blockchain is an open-source layer-2 blockchain that uses a Byzantine Fault Tolerant (BFT) consensus method and is optimized for enterprise-grade use cases. Kuro is built using the Pact language and is tailored to serve enterprises with their blockchain needs. Some of the features that Kuro offers that other private blockchains don’t offer are:
- Automatic bug detection through formal verification.
- Human-readable code that is accessible to programmers and executives alike.
- Flexibility to upgrade smart contract terms to reflect changing business needs.
- Easy integration to existing enterprise databases with a native API.
- Advanced security options like key rotation and pluggable encryption allow you to dial up security to meet your specs.
As a proof of concept, a healthcare consortium has been using Kadena Kuro to help decrease the effort required to acquire and retain insurance provider information since 2018. Kuro can be used as a side-chain with a public blockchain network (such as Kadena’s public platform) to speed up transaction processes and build new data marketplaces. This feature is especially useful for enterprises with a good collection of user or market data that can be monetized and sold on a private blockchain.
Pact is the native open-source smart contract language of Kadena with built-in bug detection. It is the first truly human-readable smart contract language that is Turing-incomplete. It allows anyone to write on a blockchain in a straightforward, direct, and secure manner. Pact was designed to solve some key problems that are present in current-day standard smart contract programming languages like Ethereum’s solidity. Solidity, being a Turing-complete language, suffers from various attack vectors like unbounded loops and a lack of Formal Verification. Additionally, when you reference code from other contracts in Pact, you stay in control of what happens with your transactions, even if they change their code
Formal Verification (FV) – This is a feature of Pact that lets developers automatically verify whether their code has any bugs or loopholes through mathematical computation. Think of the ‘Formal Verification Tool’ as the ‘Grammarly Tool’ of coding. Formal Verification in Pact is designed to not only tell you whether your smart contract can execute what you intended but also verify whether it will perform no other action besides your intended programming.
Blockchain Governance – Unlike Solidity-based contracts, Pact smart contracts can be updated, altered, or fixed via an update system that allows users to declare new versions of a smart contract that are only applied when the new code has been properly run. Any faults will cause the smart contracts to revert to their original state and prevent any further changes.
Smart Contract Security – To understand the smart contract security of using Pact, we must first understand the concept of ‘Turing Completeness’ in programming languages. To describe it simply, ‘Turing Completeness’ refers to a programming language’s ability to express all possible programs or functions. In non-technical speak, it refers to whether a programming language is all-powerful and unlimited in its application according to modern computer standards for building all types of programs.
Pact was purposefully designed to be a Turing-incomplete language, unlike Ethereum’s Solidity which is a Turing-complete language. While it is true that Turing-complete languages are much more diverse and powerful in terms of their programming capabilities, they also offer a wider range of options to bad actors to exploit and attack a program or code. Most blockchain applications currently being run do not require the full range of features that a Turing-complete language offers. Therefore, a Turing-incomplete language like Pact can offer all the programming functionality needed for most smart contracts and the applications that run on it are even more secure.
One of the key functions that give rise to a variety of attacks in a Turing-complete program on the blockchain is ‘recursion’. Recursion refers to a program’s ability to loop an action until a specific condition is met for it to terminate. In a Turing-incomplete language like Pact, any recursion that is detected will cause an immediate failure and terminate all running code. This feature significantly reduces any potential attack vectors that may be present in smart contracts.
Remember the 2016 DAO attack on Ethereum? That’s one of the most famous examples of where an attacker was able to exploit the ‘re-entrancy’ function (courtesy of the Turing-complete nature of the programming language) of the smart contract and drain the DAO’s funds before the balance was updated on-chain.
Kadena’s KDA Token
Kadena’s native token is called KDA and is used to pay for computing power on the Kadena blockchain similar to how ETH is used for the Ethereum blockchain. KDA is also paid to miners for mining blocks similar to Bitcoin’s block reward of BTC for successfully mining a block. The total supply of KDA is 1 billion tokens and the current circulating supply at the time of writing is 166,581,608 KDA (i.e 17% of the total supply).
Kadena’s total token supply is divided into five.
Platform Reserve – Around 20 percent of the total supply is allocated to the platform reserve. The Platform Reserve is a form of treasury for the project, where the tokens in the platform reserve will be partially monetized and used to provide services such as insurance, smart contract verification, and gas station grants.
Miners – Around 70 percent of the total supply is allocated to miners. These tokens will slowly be released into supply as block rewards for miners. The emission rate is projected to last more than 100 years before the block reward pool runs out.
Investor/Strategic – Around 6 percent of the total supply is allocated to Investors/Strategic. These tokens are to be issued in token sales to investors or to be distributed for strategic partnerships with other projects or ecosystem initiatives.
Contributor – Around 3 percent of the total supply is allocated to ‘Contributors’. Contributors include employees, consultants, and advisors. These are essentially tokens reserved for the team and people behind the project.
Burned – Around 10 million tokens (1% of the total supply) were burned during the initial launch of the project.
Token emissions in Kadena come from two sources – mining and platform emissions.
Mining Emissions – The mining pool accounts for around 700M tokens (70% of the supply), which will slowly be released into circulation through block rewards awarded to the miners for successfully mining a block. The emission rate is scheduled to last for a total of 120 years. The block reward began at about 2.3 KDA per block or 23.04523 KDA per block height at genesis. This amount will decrease by roughly 0.3% every 87,600 block heights until block height 95,308,800 when the mining reward stagnates at 1 KDA per block height. The block reward will eventually drop to zero at block height 125,538,057. This makes the token economy fall somewhere between inflationary (in terms of circulating supply) and deflationary (in terms of purchasing power of the token with successful adoption).
As a non-technical person, understanding and calculating the block rewards by looking at their GitHub was a headache. If you’re someone like me, fear not, I shall explain. Block Height refers to a position in a blockchain. In a traditional blockchain, the block height increases with every block that is produced. However, in a sharded blockchain like Kadena, the block height is calculated as follows: if there are 20 shards in the network, at any given block height, there will be 20 blocks (one produced by each of the shards/chains) positioned at the same block height.
Therefore, as Kadena scales into a higher number of peer chains, the individual block rewards become smaller and smaller, as there is a fixed reward at each block height. At any particular block height, the KDA rewards have to be split between all the blocks present in that block height.
Platform Reserve Emissions – The platform reserve accounts for 200M tokens (20% of the total supply). These are pre-allocated tokens that are vested over time. The time-locked slow vesting schedule was placed on the platform reserve to prevent inflation and at the same time provide strong economic backing to the platform so that it can fund and provide grants for various initiatives that will help its growth. At the time of writing, the platform emission rate stands at 22.08M tokens/year and 2M tokens/month. However, the team has reserved the right to change the emission rate in the future based on what they deem to be in the best interests of the project. With the current emission rate, the platform reserve tokens will be completely unlocked over 10 years from 2021 to 2030.
KDA Price History
Kadena’s token (KDA) has gone parabolic the past few months, quickly growing from a $100 million market cap to a $3 billion market cap in just 60 days. Kadena held two private token sales in early 2018 in the form of a Simple Agreement for Future Tokens (SAFT), the tokens were sold at the price range of $0.50-$0.75. Kadena also had a public token sale where it sold each token for $1. With the current price of KDA sitting at $9.72, that’s a 1,812% return since launch. According to CoinMarketCap, it has hit an all-time low of $0.1213 in Jan 2021 and an all-time high of $28.25 in Nov 2021. All within 11 months! KDA especially caught investors’ attention during October and November in 2021. Some reckon this is because wrapped KDA had just launched on the Ethereum (ETH) network, along with Kadena’s rollout of non-fungible token projects, their new exchange listings, and the addition of support for KDA staking.
The Kadena ecosystem is rapidly expanding with unique features like a ‘gas station’ and a new native NFT standard. It also has diverse projects building on it in the areas of DeFi, DEXs, NFT Marketplaces, and wallets.
In a blockchain first, Kadena offers the first crypto ‘gas station’ service. Gas stations are accounts that refund all gas utilized to execute specific smart contracts to users. The idea behind gas stations is to ease the user on-boarding in dApps, helping users experience a dApp without being forced through the hassle of acquiring the native crypto on an exchange and then transferring to the wallet to use the dApp’s services. Gas stations are a powerful means for the platform to cover many years of gas prices when combined with Pact’s ability for dApp developers to co-sign transactions and pay for a user’s gas expenditures when utilizing a dApp.
Dao.init is the name of Kadena’s first DAO that is currently in the test net before being launched to the main net. The formation of a DAO will allow the broader community to contribute feedback in a decentralized manner as Kadena’s ecosystem continues to grow. The DAO will serve two purposes: 1) it will allow the Kadena community to submit and vote on suggestions aimed at advancing the Kadena ecosystem, and 2) it will establish a decentralized procedure for adding new features to the Kadena platform.
Currently, there are 2 wallet services on the Kadena blockchain – Chainweaver and Zelcore
Chainweaver – This wallet service is developed by the Kadena team. It uses a 12 words seed to generate your public keys.
Zelcore – This wallet service is developed by a third party and it uses a combination of your username and password for security. In Zelcore you are responsible for your security, a bad/short username/password will put your account at risk.
If you’re wondering which wallet to use, I suggest reading this article.
Kaddex is a decentralized multi-protocol AMM DEX with native decentralized bridges that is run by a DAO on the Kadena blockchain. It can offer zero gas fee transactions due to Kadena’s ‘gas stations’. Kaddex has its token called KDX which functions both as a governance token for the DAO and a utility token for the DEX. Kaddex provides unique LPs incentives that will attract new DeFi customers to the network. When a swap is performed the user is charged a standard 0.3% trading fee, of which 100% goes to Liquidity Providers.
Non-fungible tokens on Kadena built with Pact, solve one key issue present in the ERC standards of Ethereum – lack of additional function besides ‘transfer’. According to Stuart Popejoy, the co-founder of Kadena, NFT sales in ethereum marketplaces that involve the function of ‘royalties’ are solely left at the hands of the marketplace. This creates a need to trust in a world that is supposed to be built on the concept of ‘trust-lessness’. Therefore the native NFT standard on Kadena makes it possible to automatically transfer royalties to the creator even if the sale/transfer is done outside of an NFT marketplace. This ensures and upholds the creator’s right to receive royalties from his NFT creation.
Kadena’s future looks bright according to its roadmap. The team seems ready to plunge headfirst into mass adoption with the roll-out of bridges connecting Kadena to blockchains like Terra, Celo, and Ethereum. The team has also hinted at a possible integration of Kadena into the Ledger hardware wallet. The team additionally has plans to offer various incentives in the form of grants like the developer grant and ambassador programs.
Honestly, Kadena’s architecture is beyond impressive and investors seem to be catching on to the platform’s vision. Kadena has effectively solved two major obstacles in the blockchain ecosystem, the first being the blockchain trilemma. Kadena’s unique Chainweb architecture promises to scale like no other blockchain in the market at the moment, while still holding onto the pillars of decentralization and security. It has even managed to become energy efficient at scale. The second major obstacle Kadena seems to have solved is the onboarding of institutional and enterprise entities onto the blockchain through its innovative layer-2 platform called Kuro. Kadena, through its ‘gas station’ feature, has also made it possible for retail investors and laymen to interact with dApps built on its blockchain without the need for any native utility tokens for gas. Thus, with continued real-world application and commercial viability, Kadena seems closer to bringing blockchain to mass adoption than any other project in the market.
Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.