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Cardano is bringing sharding to its blockchain through Hydra, its latest scalability innovation, announced IOHK founder Charles Hoskinson.

Hail Hydra!!! You get a second live video today: https://t.co/I0tmAqy5iH https://t.co/XRJrpJXADK — Charles Hoskinson (@IOHK_Charles) March 9, 2020

Hydra is the result of five years of research and the efforts of more than two dozen team members, Hoskinson says. Though the team published its initial build paper in November and submitted its conference paper to USENIX in September, the paper is now publicly available for the fist time.

Hoskinson adds that Hydra is a key part of Cardano’s overarching efforts to create Oroborous, a scalable proof-of-stake protocol that is capable to maintaining performance as adoption grows. “The capstone of this entire research agenda is Oroborous Hydra,” said Hoskinson.

What is Hydra on Cardano?

Hydra relies on state channels as a second-layer scaling solution.

State channels shard Cardano’s without sharding the ledger itself, Hoskinson explains. More generally, state channels handle transactions off-chain, offloading transactions from Cardano’s main blockchain. Together, these factors improve Cardano’s transaction throughput.

Hoskinson adds that Hydra “sits gracefully” on top of Cardano’s stake pool system.

Each stake pool operator can operate their own state channel or Hydra “head.” Simulations suggest that each “head” can handle about 1,000 transactions per second. With 1,000 stake pools each handling 1,000 TPS, Cardano could achieve a throughput as high as 1 million TPS.

Thanks to greater transaction speeds, Hydra will support faster transaction finality, as well as more demanding activity such as micropayments and microtipping.

Heads of the Hydra

Though research on Hydra has concluded, it still needs to be put into practice and optimized.

IOHK is now creating a Hydra team, which will code and implement Hydra in parallel with Cardano’s other development stages. Hoskinson notes that Hydra developers will not “start from zero” thanks to existing work done by Lightning Labs and other state channel researchers.

As one of the co-founders of Ethereum, Charles Hoskinson is more than familiar with scalability problems on smart contract blockchains. Developers have been working to bring sharding to Ethereum for years. If Hydra is implemented successfully, then Cardano may have solved the persistent scalability issues faced by Ethereum and its challengers.

In addition to performance and scaling, Hydra will also be extended to allow for interoperability with platforms like Bitcoin and the Lightning Network. This will allow Cardano and Hydra to support payment systems and decentralized exchanges in the future.

Hydra will also provide stake pool operators with a second revenue source in addition to stake rewards. “We’re really excited to add this solution for accelerating Cardano and taking us to the next generation,” Hoskinson concluded.