Why The Hydra Layer 2 Solution Is Important To The Cardano Network

IOHK, the developer behind the Cardano network, has announced a new solution for the network. Following the launch of smart contracts on the network, it has moved on to other projects to make sure that the network meets all of the needs of its developers. This has shone through in the latest release from the developer, called Hydra.

The Cardano hard fork brought to the forefront the possibilities for more development. Even as developers outside of the main Cardano project develop their own solutions and protocols that run on the network, IOHK is continuing its work in making the network more scalable and safe for its users. This is why the release of the Hydra Layer 2 solution is important to the ecosystem.

Layering Hydra On Top Of Existing Layer 1 Blockchain

Hydra is a Layer 2 blockchain solution built to run on top of the existing Layer 1 blockchain on Cardano. Hydra uses isomorphic state channels which basically will use the same ledger representation over and over again to provide uniform, off-chain ledger siblings. These are referred to as Heads by the developers. This puts things like NFTs, native assets, and Plutus scripting directly into a Hydra Head, which acts basically as an extension of the current existing system.

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This Layer 2 solution will provide the much-needed scalability that is required for networks with high use rates to maintain the required throughput for applications built on the blockchain. Hydra will work side by side with Cardano’s existing Layer 1 solution to provide a smooth user experience.

Why Hydra Is Important For Cardano

As things like decentralized finance (DeFi) make their way into the Cardano ecosystem, it is imperative for the network to provide suitable fee structures and security on the blockchain. This is where Hydra comes in. The Layer 2 protocol will not only help to scale the network but will also help to bring down fees to a sustainable level. This comes in the form of setting a fee structure that is both acceptable for the stake pool operator community, given that Cardano runs on proof-of-stake and fees that users deem acceptable.

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Hydra will help to set these fees to a low enough point that it is not a problem for its users, while also preventing the fees from being low enough to encourage Denial of Service (DoS) attacks.

Also, as the transaction history grows on the Cardano network, storage will become a problem over time. A Layer 2 solution like Hydra will mitigate against these problems in the future.

ADA price trending low towards $2.0 | Source: ADAUSD on TradingView.com

“Hydra is a layer 2 scalability solution that seeks to address all these concerns and aims to maximize throughput, minimize latency, incurring low to no costs, and greatly reducing storage requirements.”

More information on Hydra will be available at the Cardano Summit scheduled to happen on the 25th-26th of September 2021.

Featured image from Peoples Gazette, chart from TradingView.com

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