• 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 system.

Charles Hoskinson, CEO of IOHK, the company responsible for the development of Cardano (ADA), announced the publication of the paper on Hydra yesterday. Hydra is a scaling solution for Cardano’s proof of stake, which is expected 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 stake pool model”. It implements state channels that enable the rapid 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 stake pools, each processing 1,000 TPS, Cardano could thus achieve a throughput of up to one million transactions per second.

Hoskinson further emphasized that each “Hydra head” will be able to reach the so-called “Fast Finality”, which allows the irreversibility of a transaction to occur almost in real time, as usual 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 abstract to the Hydra paper, it is stated that Hydra offers significant advantages over existing state channel solutions. For example, the smart contract code of the first layer does not need to be adapted to be compatible with the scaling solution:

A serious disadvantage present in current layer-two state channel protocols is that existing layer-one smart contract infrastructure and contract code cannot be reused offchain without change. In this paper, we introduce Hydra, an isomorphic multi-party state channel. Hydra simplifies offchain protocol and contract development by directly adopting the layer-one smart contract system. We present the onchain contracts to open and close Hydra heads (our isomorphic state channels) and a novel offchain protocol for fast evolution of heads.

Cardano becomes the fastest system in the world

Hoskinson added that Hydra is compatible with all phases of Cardano: Shelley, Goguen and Voltaire because it is a Layer 2 solution built on top of Cardano’s proof of stake protocol. Hydra can also be combined with Sharding. Thus, the basic protocol could already process 1,000 TPS, which will be enabled by the developments of Shelley and Goguen. On top of that, Hydra can handle 1,000 TPS per stake pool, as Hoskinson stated:

As you add heads, you get more performance. So when you look at the dynamics of the system like this, we are at VISA scale at base ledger and comparable with our fastest competitor Ripple. And at the head level we can scale to a global system that is very natural and easy to shard. Those heads can also be used for interoperability with other networks, like the Bitcoin network, the 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 phases 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 competitor projects by saying:

Cardano will be the fastest system in the world.

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