Hydra

Hydra is a layer 2 solution for Cardano. It is not a single protocol, but rather a family of layer 2 protocols designed to address network security and scalability capabilities. As part of the Basho development phase, Hydra focuses on steady network optimizations and improvements to establish a scalable, versatile, and high-throughput blockchain. The Hydra suite of protocols includes the Hydra Head protocol, Interhead Hydra, Hydra Tail, etc.

The Hydra Head protocol is the first in this suite and an important element of Cardano’s scaling journey. It provides the foundation on which to build out advanced scalability solutions and will be the first element to be delivered while research on the others is completed.

Hydra Heads are isomorphic multi-party state channels and form fast and secure off-chain communication paths between two or more participants to process transactions. Being isomorphic means that this channel works just the same way as the mainchain, but is faster and cheaper to operate due to its local scope. It is very similar to Bitcoin Lightning, but elegantly extends the mainchain with fully capable EUTXO mini-ledgers to layer more complex solutions on top. Use cases of the basic Hydra Head include bank-to-bank private transfers for processing multiple transactions between 2 or more peers, a pay-per-use API service to pay a virtual private cloud provider for resources, an auction between a seller and several bidders, etc.

This technology can also produce advanced layer 2 solutions, including networks of Hydra Heads that would support fast and cheap consumer-to-consumer payments, or Interhead Hydra, which could introduce seamless smart contract scalability.