Kadena - The next Titan of Layer-1s?
What if I told you the most cited author in Satoshi Nakamoto’s renowned 2008 Bitcoin white paper was a direct advisor to a project? Pretty crazy right? Now, what if I told you the founding team built JPMorgan’s first blockchain (Juno), now known as Quorom? Sound interesting?
Well, I want to introduce you to a project that recently came up on my radar - Kadena ($KDA).
Introduction
In 2016, Stuart Popejoy and Will Martino, who led JP Morgan’s Blockchain Center for Excellence, decided to found the start-up Kadena, with a new blockchain.
The two built the company’s first blockchain called Juno, the technology of which is used in today’s JPM Coin. As the company’s website reports, the company was created to address a number of problems with blockchain technology that no one else would address. The history behind Kadena is an interesting case study in the new field of blockchain consensus algorithms and distributed computing.
Kadena is a 'distant relative' of the Raft consensus algorithm. The Raft consensus mechanism was followed by the JP Morgan project Juno - which is no longer in production. JP Morgan’s new blockchain Quorum is very different from Juno and uses a fusion of ideas from sidechains and ethereum – public smart contracts are allowed on the blockchain in addition to private contracts, which are represented as encrypted hashes and replicated via side-channels.
Kadena is the “next generation Juno”. It uses a new, but related, protocol called ScalableBFT that was spawned from the open-source code of the Juno project and was built by the two key developers who built Juno.
The Technicals
Kadena was the first company to create a hybrid blockchain based on smart contracts, back in January 2020. Kadena’s uses the Proof of Work consensus mechanism. The fact that the PoW system is used, as opposed to Ethereum and Solana which use PoS (Proof of Stake), results in greater security and speed in transactions as demonstrated by the disruptions experienced by the two PoS blockchains in recent months.
Pact is the company’s smart contract that would act as a bridge that binds the Kadena ecosystem together and is the most powerful tool for creating applications on a blockchain (Pact is an open-sourced smart contract language).
Unlike other platforms, Kadena is designed to power global financial systems. The protocol continually scales to higher TPS (Transactions per Second) as more chains are added to the network. With 20 chains, the Kadena blockchain platform achieves an industry-leading 480,000 transactions per second.
Kadena leverages what no other blockchain has: trustless (no third-party trust needed), decentralized, cross-chain transfers. And soon, transactions will be able to be executed seamlessly across Ethereum, Celo, and Terra (secured by KDA bonding), powered by Kadena’s Chain Relay Bridge.
Mining without the environmental impact. As you’re aware, both Bitcoin and Ethereum are energy intensive. To mine Bitcoin each year requires 66.7 terawatt-hours per year or enough to power 10 million homes. Kadena’s public blockchain is just 1/50th of that amount through their unique braided architecture.
Tokenomics
Total supply: is fixed at 1 billion tokens to be mined over 120 years.
Circulating supply: 153 million as of October 2021
The Use Case
Enterprise Use Cases
Presently, Kadena is working with enterprises including U.S. based USCF, an alternative investment product provider and Rymedi, a startup that develops blockchain-based healthcare applications, according to Martino.
USCF is developing financial products on the Kadena private chain and will use smart contract to allow consumers to access it through the public chain. According to Martino, USCF believes that hybrid blockchain could be the backbone of the next generation of exchange-traded funds (ETFs).
Rymedi, on the other hand, is working on a pilot with the U.S. Food and Drug Administration (FDA) as well as an application that tracks CBD oil from farm to consumer table. The pilot with the FDA is to build an application that collects real-world evidence or data on healthcare products using blockchain. Real-world evidence plays an important role in the FDA’s decision to expand patent protection on products. According to Martino, building on a hybrid blockchain makes it possible to have a public data marketplace for real-world evidence in a compliant way.
Better Onboarding for Dapps
Kadena also claims to have fixed the onboarding issues that have plagued blockchain networks. Despite the growth that Ethereum is seeing with decentralized applications (dapps) — it remains the favored network for developers — the adoption of dapps continues to be limited by a fundamental user experience issue.
New users need to first jump through the unfamiliar and technical hoops of learning how to use a crypto wallet and buying some crypto before they can try a dapp. An Ethereum community solution called Gas Station Network currently seeks to solve that problem.
Martino said Kadena supports gas stations out of the box through an update to its smart contract Pact.
Wrapping it all up
Kadena was recently recognized by Forester as one of the most promising blockchain companies to watch in 2020. They have existing partnerships with large companies like Cosmos, Amazon marketplace, Microsoft and Polkadot. Existing customers include Fortune 500 companies ($3B asset manager USCF Investments) and others who are using them to improve operations and data management in healthcare, insurance, asset management, construction, and energy sectors.
As we have seen, the technology is a massive leap forward and if executed to its full potential, it could become a future blue-chip layer 1. The team is highly experienced in blockchain and have an excellent advisory board. The only thing I would say - are they too ambitious? I know they are looking at creating their own decentralised DEX offering called Kaddex and also are looking to delve into the NFT sphere.
Potential
Right. Let's get down to numbers.
There are two ways to look at $KDA’s potential. This bull run vs Long term.
I wouldn’t like to speculate on the long-term potential of this project just yet, as I would like to see how it develops and which applications and projects use the Kadena blockchain. Therefore, lets speak about the potential for the next 3-12 months:
Current Marketcap: $557 Million with a token price at $3.60
Provided we remain bull and see the sort of Altcoin season everyone is expecting - once BTC stabilises in the 6-figure territory, I would compare Kadena to another layer-1, Fantom ($FTM). The current Mcap of $FTM stands just shy of $6 Billion.
Potential Marketcap: $6 billion with a token price at $38.77 - representing a 10.7x.
This is not to say Kadena won’t perform beyond these numbers, it could well do so and it also may not reach these numbers. But from what I can see - the buzz around the project together with the increase in volume, signals that $KDA could be a bull market winner.