The yet-to-be-launched Hydra protocol will help Cardano achieve its scalability quest.
The long-awaited Hydra protocol is now live as developers are actively working on the Cardano (ADA) protocol roll out Proof of concept implementation for interested participants. While blockchain technology is being hailed as the next frontier in digital payments, its relative use may be limited due to scalability.
as Report Back in November last year, Cardano introduced the new protocol as a way to achieve this much-needed scalability. While the Cardano blockchain is capable of generating a block every 20 seconds, the total number of transactions that can be recorded in a block is very limited.
As blockchain network adoption grows, this limitation will become a key challenge when multiple people try to use the protocol. This necessitated the design of a new tool to help circumvent scalability challenges. Hydra is that answer, designed to work in an off-chain environment, using the main Cardano blockchain as its core settlement layer.
While the most scalable blockchain protocols allow only a few thousand transactions per second (TPS), it is nearly impossible to achieve this speed in a sustainable manner using current technology. However, Hydra’s predictions are that it could allow up to 1 million transactions per second, helping Cardano achieve its key goal of being the most scalable layer 1 protocol.
How the Hydra Protocol Works
The viability of the Hydra protocol is not open to everyone. To trade with Hydra, a group of users who trade regularly need to get together and decide whether to open the Hydra Head. If a decision is reached to open the Hydra header, participants will need to transfer funds from the Cardano blockchain to Hydra. The transaction is completed through an on-chain program.
Afterwards, the funds are locked in a script where all participants can ensure equal funds registered on the blockchain. After the initial lock, all participants can send funds to each other, and this settlement happens offline. This way, thousands of transactions can be made at a time, opening several Hydra Heads at a time.
This means that reaching millions of TPS is possible, while major transactions on the Cardano parent protocol will run smoothly. Transactions on Hydra Heads are powered by Plutus Scripts, which means we can get more than one transaction on a different Hydra Head at a time.
By its design, the Hydra Head can be closed and the corresponding value of each participant’s funds calculated so that no one can be scammed. The Sundaeswap team has run a PoC on the protocol, showing off all the possibilities.
Details about Hydra’s operational capabilities are detail here.
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Powering Large-Scale Transactions
While blockchain payments are known to be faster and relatively cheap, the fact that they are not scalable still positions traditional payment institutions such as Mastercard and Visa as a superior payment system than it is today.
With new scalability measures in place, Cardano can revolutionize the wider ecosystem and become the gateway to microtransactions that power wider e-commerce adoption.
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