Kadena (KDA), the Scalable Blockchain that Modernizes Proof-of-Work

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Kadena (KDA), the Scalable Blockchain that Modernizes Proof-of-Work
Kadena (KDA), the Scalable Blockchain that Modernizes Proof-of-Work

Kadena (KDA) is a blockchain that has chosen Proof of Work (PoW) when the whole industry is moving away from it. It aims to demonstrate that this consensus still has a future by resolving the blockchain trilemma and, more particularly, the scalability of a PoW blockchain. Its proposal lies in the architecture of its blockchain, its famous Chainweb. Overview of this unique blockchain that took a risky bet against the grain of the cryptocurrency industry.

What is Kadena (KDA)?

The Kadena company was created in 2016 in the United States by former employees of the blockchain division of JP Morgan bank with the aim of offering a blockchain solving the famous blockchain trilemma. This theory, developed by Vitalik Buterin, hypothesizes that it is extremely complicated for a blockchain to achieve high levels of security, decentralization and scalability at the same time.

It is, therefore, with this idea in mind that the Kadena project was born. It is a hybrid blockchain with two layers (layers), Layer 1 is named Chainweb, and Layer 2 is named Kuro.

The Kadena blockchain also has its own programming language, Pact. This aims to correct the defects of a language like Solidity. Pact is a language created to develop smart contracts on Kadena in a simple, reliable, secure way and offering a high degree of control.

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Kadena (KDA) Logo

Kadena, a Countercurrent Proof of Work Blockchain

The Kadena blockchain goes against the grain of the entire cryptocurrency industry by choosing a Proof of Work (PoW) consensus protocol. Indeed, blockchains using PoW are often singled out because mining is qualified by many as an ecological disaster while it faces a serious problem of scalability (at least for layer 1). This consensus has lost much popularity in recent years in favour of consensus based on Proof of Stake (PoS).

If we look at the side of the top 100 cryptocurrencies, at the time of writing these lines, only 8 blockchains operate completely on a PoW consensus: Bitcoin, Litecoin, Bitcoin Cash, Ethereum Classic, Monero, Bitcoin SV, Dash and Kadena.

Ethereum, Dogecoin, and ZCash, although using PoW consensus, are in a transition period to PoS consensus, so we haven’t counted them.

Why did the Kadena blockchain choose consensus PoW in this case?

Proof of work is known to offer superior security to proof of stake, evidenced by the resilience of Bitcoin for all these years. But this increased security comes at the expense of the scalability of the network; these, at least on the main layer, are very little scalable. On average, Bitcoin can process around 7 transactions per second (TPS), Ethereum 1.0 is around 25 TPS, while Litecoin is close to 55 TPS.

These numbers are relatively low and lead to network congestion during periods of high usage, which in turn leads to higher transaction fees. For comparison, Solana, a PoS blockchain, currently processes around 2,000 TPS.

Kadena’s Chainweb and Graph Theory

Kadena has a relatively new approach to Proof of Work, which the project intends to revolutionize with its proprietary architecture, dubbed Chainweb, and the concept of sharding for the first time applied to a PoW blockchain.

Let’s take a simple example. If the Bitcoin blockchain is able to process 7 TPS, then theoretically, two Bitcoin blockchains can process 14 TPS.

However, using multiple chains in this way to improve scalability is not an option, as they are completely independent. This poses two problems:

  • Cryptocurrencies are not the same since they come from completely independent blockchains;
  • Security is compromised; diluting the network across multiple chains, attacking a single chain becomes easier. A 51% attack becomes a 5.1% attack with 10 chains.

Kadena’s Chainweb starts from this principle to solve the scalability problem by providing its own solution. The Chainweb, literally the web of chains, braids these chains in the same protocol, but this poses a technical challenge.

Concretely, with a Chainweb of 2 chains, each block logically includes the hash of the previous block of the same chain, but also the hash of the previous block of the other chain. So a Chainweb of 2 chains includes 2 hashes per block.

This process makes it possible to make the network all the more secure, since it would be necessary to control more than half of the hashrate of the two chains to compromise a block, the hash of the previous block of the other chain being registered there. In addition, it allows only one cryptocurrency on several chains, here, in this case, the KDA, the native cryptocurrency of Kadena.

The problem is that one extra hash in each block equals 256 more bits of information stored, and with a Chainweb of 10 chains all linked together, that equals that much more information to store.

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Figure 1: The Chainweb without graph theory

Kadena has the ambition to have a Chainweb capable of processing a large number of transactions with a mesh of several chains. However, having 10 chains would imply that each block contains 10 hashes like the image above. This solution is not viable due to the storage limit in each block.

Thus, the optimal solution that Kadena uses comes from graph theory.

This theory mainly uses two variables that will be applied here to the chains of the Chainweb:

  • The degree: it is the number of chains to which a chain is connected, therefore the number of additional hashes per block;
  • The diameter: it is the number of jumps to be made to reach the furthest chain of the Chainweb; in other words, the number of confirmation blocks necessary to transfer KDA tokens from any chain to another.

At the start of the project, Chainweb had 10 chains, with a degree of 3 and a diameter of 2, as shown in the image below. Each circle corresponds to a string.

Figure 2: 10 strings on Kadena using graph theory

As of August 2020, the Kadena Network was updated to contain 20 channels. This is still the case at the time of writing these lines.

10 new channels have therefore been added to Kadena’s Chainweb. The structure of the graph has logically changed since the diameter has changed to 3 while the degree is still 3.

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Figure 3: 20 strings on Kadena using graph theory

So, theoretically, Kadena’s Chainweb can add as many chains as it wants. Still, the protocol must master these two variables, degree and diameter, which will inevitably change as more chains are added to the network.

With this architecture, the finality of a transaction on the network is 1.5 seconds: every 30 seconds, the network processes 20 blocks thanks to the 20 chains. The more chains, the lower the finality will be, and this is also the strength of the Chainweb: with 50 chains, the finality of a transaction on the network would be 30/50 = 0.6 seconds.

This is how Kadena’s Chainweb intends to solve the scalability problem of a PoW blockchain. The next major goal announced by Kadena is to deploy  50 channels on its Chainweb.

Kadena, a very scalable hybrid blockchain

480,000 transactions per second is a number that often comes up when the Kadena blockchain is mentioned and which is strongly highlighted by the team behind the project.

To fully understand how the developers arrived at this number, we must start by distinguishing the two layers that makeup Kadena’s hybrid blockchain:

  • The public blockchain (Layer 1), which is Kadena’s Chainweb, with 20 chains;
  • Kadena’s private solution (Layer 2) is named Kuro.

On Kadena’s public blockchain, therefore Chainweb, each chain is theoretically capable of processing between 20 and 40 TPS. With 20 chains, the scalability of Kadena’s public blockchain is, thus, around 400 to 800 TPS, which is very far from the 480,000 TPS mentioned by the team.

This is where Kadena’s layer 2 solution, Kuro, comes in. A Kuro chain is capable of processing 8,000 TPS on 500 private nodes hosted on Amazon Web Services and Microsoft Azure.

It is possible to use 2 Kuro chains with each Chainweb chain as a side chain, which gives an additional 16,000 TPS capacity per chain. This adds up to an additional 320,000 TPS across the entire Chainweb if two Kuro chains are used per chain.

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Figure 4: Using two Kuro chains on one Chainweb chain

Finally, although the Chainweb currently contains 20 chains, the team plans to add many more, as we have seen previously, offering a phenomenal theoretical scalability for a PoW blockchain. However, it is worth noting that at the time of this writing, Kadena is very far from having the adoption that requires such scalability.

In conclusion, the Chainweb is able to process only 400 to 800 TPS with its 20 chains, and it is really thanks to its combination with Kuro that Kadena manages to be so impressive in terms of scalability. This is where Kadena forms a successful hybrid blockchain.

The Kadena Ecosystem

At the time of writing these lines, the Kadena ecosystem is still in its infancy, and this is one of the weak points of the project. Few decentralized applications (dApps) are functional, most of which are still in development. Let’s see the main points that make up the Kadena ecosystem.

First, it is necessary to mention the “gas stations ”. One of the major strengths of the Kadena ecosystem comes from its extremely low fees. Its dApps will even be able to offer totally zero transaction fees thanks to this concept which gives dApps the possibility of covering gas costs for its users.

One of the biggest barriers to using dApps and decentralized finance (DeFi) is obviously the gas fees associated with each action. Thanks to the “gas stations” implemented by Kadena, they will pay the gas costs instead of the user, making the experience totally free.

Developers will bear the burden of gas fees, but these are so low on Kadena’s network that it won’t be too much of a burden to bear.

Here are some of the decentralized applications that are already running on Kadena.

Kaddex

Kaddex is Kadena’s flagship decentralized exchange (DEX). Its particularity lies in the fact that it is the first DEX requiring no gas fees to be used, and it is in this sense that Kaddex intends to disrupt the industry.

Ultimately, Kaddex aims to offer a complete experience of decentralized finance (DeFi) on its platform, all at no cost, thanks to gas stations.

Chain Weaver

Chainweaver is Kadena’s official wallet. However, it is not very intuitive to learn.

Indeed, the Chainweb of Kadena has 20 chains; it is a little more complicated to use than traditional wallets of other blockchains since it is necessary to manage the address of the 20 chains there.

Other wallets exist, such as Zelcore, X-Wallet or K:Wallet.

X Wallet

X-Wallet is a wallet created by the Kaddex team. It is much easier to use than Chainweaver, which is why we recommend it. It is associated with the DEX of Kaddex and is comparable to MetaMask on Ethereum.

Marmalade

Marmalade is Kadena’s main non-fungible token (NFT) marketplace. It offers 100% on-chain transactions, no gas fees thanks to gas stations, and interesting features such as shared ownership of an NFT.

Hypercent

Hypercent is the launch pad for future Initial Dex Offerings (IDOs) on Kadena’s network.

Also, it is worth mentioning Tokensoft Wrapped. This entity working with the Kadena team, developed the Wrapped Kadena (wKDA) in order to use the KDA on other blockchains. The wBTC and the wETH will also appear on the Kadena network, which will notably make Ethereum and Kadena interoperable.

Kadena also extends to other Layer 1 protocols such as Terra, Polkadot, Celo or Cosmos.

What are the Roles of the KDA Token?

The KDA token is the native cryptocurrency of the Kadena project. Above all, it allows funds to be transferred quickly and almost free of charge.

Since Kadena is a PoW blockchain, there is no staking available on the network. Concretely, within this blockchain, the KDA mainly serves as a reward for the miners of the network. It is also used as a transaction fee on each transaction or when executing smart contracts.

The roles of the KDA will likely be more varied as the Kadena ecosystem takes shape, but it is already being used by decentralized applications developed on the network.

Kadena Fundraising

The Kadena venture benefited from two rounds of funding in its debut in 2018 with a price of $0.50 in Series A and $0.75 in Series B per KDA token. The company raised $2.25 million in Series A and $12 million in Series B in 2018, for a total of $14.25 million.

Investors such as Multicoin Capital, Coinfund, Metastable, SV Angel and Devonshire Investors participated in these seed rounds.

Finally, there was KDA’s Initial Coin Offering (ICO) in November 2019, which raised the team an additional $15 million. The rate for 1 KDA varied from 0.5 to 1 dollar, depending on the method of investment.

A total of $29.25 million was therefore raised by Kadena teams through these means.

Kadena’s Tokenomics

At the Tokenomics level, KDA’s maximum supply has been set at 1 billion units.

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Figure 5: Overview of KDA tokenomics

9% of KDAs were unlocked at the launch of Kadena, with 3% allocated to contributors (employees, consultants) and 6% to investors.

1% of the KDA supply, or 10 million KDA tokens, was burned at launch, reducing the maximum supply to 990 million KDA.

The remaining 90% of the supply will be issued over the long term by two means:

  • 20% via the platform reserve: therefore, 200 million KDA will be issued until 2030. These tokens will be used to support the development of the Kadena ecosystem through grants, partnerships or even community initiatives;
  • 70% via mining rewards: 700 million KDA will be issued over 120 years.
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Figure 6: KDA token issuance schedule until 2031

At the time of writing, 171 million KDA are in circulation or 17% of the maximum supply. Over time, fewer and fewer tokens will be issued, but it is worth noting that during the first 10 years of Kadena’s life, inflation is quite high. Between early 2021 and early 2022, the circulating supply of KDA tokens increased by approximately 65%.

It should be noted that the Kadena team reserves the right to change the rate of issuance of mining rewards or the reserve of the platform.

Mining on the Kadena Blockchain

Since Kadena is a PoW blockchain, it relies on mining to operate and grow the network. Miners receive KDA tokens as rewards for validating and producing a block on the Kadena blockchain. They also receive KDA via transaction fees and the gas necessary for the operation of smart contracts, even if these are very low.

Every 87,600 block heights, mining rewards drop by 0.3%. A block height is composed of 20 blocks since Kadena currently has 20 chains on the Chainweb.

At the time of this writing, approximately 21.3 KDA are granted in rewards for each block height, so almost 1.05 KDA per block. This also implies that the more chains the Chainweb has, the more block rewards will be diluted since mining rewards are set by block height.

This puts the KDA between an inflationary economy in terms of the supply of circulation, and a deflationary economy in terms of the purchasing power of the token if the project succeeds.

Finally, mining on Kadena is extremely energy efficient. To get an idea of ​​electricity consumption over one year, Bitcoin requires at the time of writing about 132 TWh and Ethereum 73.2 TWh, while Kadena requires about 0.03 TWh, according to an estimate made in October 2021.

The difference is just as great in terms of electricity consumption per transaction. This is important information to keep in mind when talking about mining on the Kadena network since it is extremely energy efficient.

Kadena Team and Partners

The founders of the Kadena project are experts in the cryptocurrency ecosystem and the financial world:

  • Stuart Popejoy, founder and CEO of Kadena, was previously in charge of the blockchain arm of JP Morgan and had over 15 years of experience in the financial industry;
  • Will Martino, co-founder and chairman of Kadena, served as chief engineer for JP Morgan’s blockchain prototype while serving as technical lead for the Security Exchange Commission’s (SEC) committee on cryptocurrencies.
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Figure 7: Kadena founders Will Martino (left) and Stuart Popejoy (right)

The rest of the team, made up of more than 40 people at the time of writing, has a variety of backgrounds. We find, in particular, alumni from Microsoft, Apple, Cardano, Tezos and many others.

The project also has a renowned advisor,  Stuart Haber. He is the co-creator of the blockchain and is the most cited person in Satoshi Nakamoto’s Bitcoin whitepaper.

Kadena partners are quite numerous, and we can count Terra, Polkadot, Celo, Cosmos, Ledger, Ethereum, Chainlink or even Flux.

How to Buy KDA Tokens?

The KDA token is available on KuCoin, Gate.io, Bittrex or Binance. The easiest way is to get it on Binance due to the high liquidity of the platform.

Explanations for Buying KDA on Binance

  • Register on Binance;
  • You will receive an email and need to click on a link to verify your account;
  • Deposit funds on the platform;
  • Click on the Market menu and look for the KDA/USDT pair;
  • All you have to do is buy KDA for the amount of your choice;
  • Congratulations, you are now in possession of KDA tokens.

Ratings and Reviews on Kadena and its KDA Token

Kadena is a new generation, decentralized and technically very powerful hybrid blockchain. It has many advantages over its competitors, such as the elimination of transaction fees, very high-level security and phenomenal scalability.

Is the blockchain trilemma really solved by Kadena? It is still too early to tell. Indeed, this blockchain is still very young, and it will need a much higher adoption to prove itself at the technical level. In addition, its Pact programming language, although easy to access, remains a new language. It will therefore be necessary to succeed in convincing the developers that there are benefits to be drawn from it.

Most of the ecosystem’s key apps are still in development as of this writing. It is therefore important not to pronounce too quickly on the capabilities of this blockchain. But its ecosystem is being built little by little, with its many partnerships and the know-how of its very competent team.

Kadena is undoubtedly the first blockchain to solve the problem of scalability of a blockchain using Proof of Work, which is already a technical feat in itself. Will the demand follow? This will be interesting to follow because the technique is not everything in this industry.