• The layer 2 solution „Hydra“ will give the Cardano network a scalability of over one million transactions per second.
  • The paper on Hydra was published yesterday and describes the isomorphic multiparty state channel.

Charles Hoskinson, CEO of IOHK, the company responsible for the development of Cardano (ADA), announced yesterday the publication of the research paper on Hydra. Hydra is a scaling solution for Cardano’s proof of stack, which is expected to be able to process over one million transactions per second.


Hoskinson explained that the paper on Hydra is the result of a colossal effort, involving over five years of research by more than two dozen full-time team members. The paper was originally completed in November, with a conference paper submitted in mid-February. Since yesterday, the paper is now publicly available for everyone on ePrint.


What is Cardano’s Hydra?

As Hoskinson explained in his new video update, Hydra is a Layer 2 scaling solution implemented over Cardano’s Proof of Stake protocol, while fitting „very well with the Pool staking model“. It implements state channels that enable fast processing of payments and smart contracts beyond the blockchain (off-chain). Simulations have shown that each „Hydra head“ can currently process about 1,000 transactions per second (TPS). With 1,000 stacking pools, each of which processes 1,000 TPS, Cardano could achieve a throughput of up to one million transactions per second.

Hoskinson further emphasized that each „Hydra head“ will reach the so-called „Fast Finality“, which means that the irreversibility of a transaction can be done almost in real time, as commonly used in a Byzantine Fault Tolerance (BFT) protocol. Thanks to the „Fast Finality“ and the high transaction speed, even micro-transactions will become possible, Hoskinson said.

In the article on the Hydra Paper, it is stated that Hydra also has other significant advantages over existing state channel solutions. For example, the Smart Contract Code of the first layer („Layer 1“) does not need to be adjusted to be compatible with the scaling solution:

A serious disadvantage of the current protocols for layer two state channels is that the existing Smart Contract infrastructure and the contract code of layer 1 cannot be reused outside the blockchain without modifications. In this paper we introduce Hydra, an isomorphic multiparty state channel. Hydra simplifies the development of off-chain protocols and contracts by directly adopting Layer 1 Smart Contracts. We introduce the onchain contracts for opening and closing Hydra heads (our isomorphic state channel) and a novel offchain protocol for rapid head development.


Cardano becomes the fastest system in the world

Hoskinson added that Hydra is compatible with all stages of Cardano Shelley, Goguen and Voltaire development because it is a layer 2 solution based on Cardano’s Proof of Stake protocol. Hydra can also be combined with Sharding. This means that the basic protocol could already process 1,000 TPS, which will allow the developments of Shelley and Goguen. On top of that, Hydra can handle 1,000 TPS per stake pool, as Hoskinson stated:

The more heads you add, the more power you get. So if you look at the dynamics of the system in this way, we’re on a VISA scale in the basic ledger and comparable to our fastest competitor Ripple. And at the head level, we can scale to a global system that’s very natural and easy to shade. These heads can also be used for interoperability with other networks, such as the Bitcoin and Lightning network.

The research is now complete and implementation of the code has begun, Hoskinson said. Currently, IOHK is forming a Hydra team to code Hydra in parallel with the other stages of Cardano’s development. Fortunately, thanks to the work already done by Lightning Labs and other state channel projects, IOHK developers do not have to „start from scratch“.

Hoskinson closed the video update with the promising and combative words to competing projects by saying

Cardano will be the fastest system in the world.


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