IOHK Releases Ouroboros Hydra Protocol, a Layer-2 Scaling Solution for Cardano Blockchain

Hydra will enable Cardano to scale to one million and even more transactions per second, reaching or exceeding the level of VISA

March 25, 2020 — IOHK, the development company behind Cardano, today officially unveiled the Ouroboros Hydra scaling protocol.

IOHK, the engineering company co-founded by Charles Hoskinson and Jeremy Wood, today has unveiled Ouroboros Hydra (Hydra), an off-chain protocol, which enables vastly increased scalability for the Cardano blockchain, whilst still providing low latency and minimal storage per node.

The Hydra solution enables a variety of previously unfeasible everyday applications, including micropayments, voting, insurance contracts, and any app that requires low fees or instant confirmation.

Hydra is the result of a five-year EU-funded collaborative research project, led by IOHK researchers and other partners from the company’s blockchain research lab at Edinburgh University.

The research was funded by the EU’s ‘Privilege Project’ as part of its mission to unite European researchers in pursuit of new cryptographic protocols for blockchain and distributed ledger technologies. These technologies will be capable of supporting everything from online voting to insurance contracts.

Layer-2 Solution

Hydra is an essential part of IOHK’s goal to create a highly scalable proof-of-stake protocol for Cardano – IOHK’s decentralized public blockchain and cryptocurrency project. It is classified as a layer two blockchain scaling solution, which will sit on top of the Cardano Protocol and increase its working speed.

The novel breakthrough sees each user connecting to the network generating 10 additional ‘heads’, each providing an additional ‘lane’ of throughput for data and transactions. Hence unlike conventional systems, the system actually becomes faster, with less latency as it scales.

University of Edinburgh simulations show that each Hydra head can presently handle around 1000 transactions per second, but, it is also possible to further optimize the process. As more heads are added to the protocol, more scaling is attained – so with 1000 heads, the network could theoretically scale to a million transactions per second – comfortably in excess of current global payment systems such as VISA.

Professor Aggelos Kiayias, Director of Edinburgh University’s Blockchain Laboratory stated:

“Solving the scalability question is the holy grail for the whole blockchain space. The time has come to apply a principled, evidence-based approach in designing and engineering blockchain scalability solutions and this research is a decisive step in this direction.”

The white paper reveals that Hydra achieves close to the theoretical maximum amount of transactions possible within the limitations of network speed, geographical distance, and the number of participants. Essentially, the bottleneck becomes the network connection between the participants, not the protocol.

Crucially, Hydra demonstrates sufficient transaction speeds to facilitate ‘micropayments’ – fuelling the replacement of, for example, subscriber-based online advertising with a new system enabled by scaling, achievable only via Cardano’s Hydra functionality. This would allow online newspaper readers to pay per article rather than per month, or gamers to buy virtual items within games for fractions of a penny.

Charles Hoskinson, CEO of IOHK said:

“Our Ouroboros Hydra solution is the result of a colossal international research effort, spanning five years, that aimed to solve the security and scalability problems affecting blockchain. Once implemented, it will allow the Cardano blockchain platform to scale to process more transactions than any other blockchain or traditional payment system. IOHK’s Ouroboros whitepaper is a capstone of our team’s research and has been cited more than 1000 times. It forms an essential part of Cardano’s ultimate goal of creating a blockchain-based global financial and social operating system.”