Introduction
Cardano is a blockchain that aims to create an optimized ecosystem for decentralized applications (DApps) development. The team behind Cardano is working on a new protocol called Hydra Head, which is an important part of their journey to scale the network. In this article, we'll explain what the Hydra Head protocol is, how it works, and what it's used for. We'll also address some misconceptions about the protocol and share the team's plans for the future.
What is the Hydra Head Protocol?
The Hydra Head protocol is a way for a small group of people to process many quick transactions with each other. Think of it like a private poker table where each person brings their own chips to play. The table is run by a dealer (the on-chain script) who makes sure everyone plays by the rules. Players can leave the table at any time and take their chips with them. The final result of the game is known outside of the table, but the history of what happened during the game is only known to the players.
The Hydra Head protocol is one of a whole suite of protocols that we usually refer to as ‘Hydra’. The current engineering effort is focused on implementing the Hydra Head protocol as published in Hydra: Fast Isomorphic State-Channels by Chakravarty et al.
Why Hydra Heads are Important
Hydra Heads are a strong foundation that can help make Cardano more scalable. Hydra Heads are like the foundation of a skyscraper. They are important and necessary for building something bigger and better, but they are not the final product. They help make the larger scalability plan possible by using a special way of handling transactions called Extended Unspent Transaction Output (EUTXO).
When to Use Hydra Heads?
Hydra Heads are useful when a small group of people needs to process many quick transactions with each other. Think of it like a digital vending machine, where you pay for each use, or a private network only banks can use, or an auction where only a few people can bid and it happens fast. The use cases are many and varied, and some may last for months, while others may only last a few hours.
Stake Pool Operators (SPOs)
Our initial Hydra research in 2020 suggested that SPOs would be likely candidates for running Hydra Heads. However, as the Hydra Head protocol has been researched and built as a proof of concept, it is a misunderstanding to say that only SPOs should run a Hydra Head to ensure ledger scalability. In fact, SPOs have no intrinsic interest in opening Heads with each other without a reason to transact.
In fact, anyone can participate in a Hydra Head, and it is not limited to SPOs. We believe that one way people will use Hydra Heads is by offering them as a service to other users. This way, users can use the service without having to set it up or maintain it themselves. This can be achieved without giving up custody of funds by running the infrastructure on behalf of end users, who generally have neither the interest nor the technical skills to maintain such infrastructure.
The Roadmap
The team behind the Hydra Head protocol is working on an open-source GitHub project and they are planning a regular and frequent release cadence. They released an initial developer preview in September (0.1.0) followed by a second iteration (0.2.0) before Christmas. Our next update (version 0.3.0) will be available in February.
The team is committed to engaging frequently with developers of the Cardano ecosystem, and this is not about a ‘big bang’ release but rather an iterative release cycle. They understand that developer challenges, needs, and feedback are essential to building something useful. They will be transparent about the course of their development efforts, and you will find feature issues, milestones, and project boards available on the Hydra Head repository.
The team's focus is on creating meaningful and feature-packed releases as they journey along testnet and later mainnet maturity with version 1.0.0. The roadmap also includes tentative dates, but these forecasts are based on the work accomplished so far and the team's estimates of the work remaining. They will reflect on the content and the dates regularly in an agile manner to keep the roadmap as accurate as possible.
Community feedback is essential
The team will measure their success by how much traffic will be running in Hydra Heads in comparison to the Cardano mainnet. This means that they can’t reach their goal without the community, and Hydra can only be successful if it is useful to current and future Cardano users.
They welcome the community to engage with them to share questions, feedback, or contribute to the development effort. This is a great opportunity to build a whole ecosystem of layer 2 solutions for Cardano together. The Hydra Head protocol is the first step in a series of more advanced solutions that will be developed in the future. At IOG, the team has already started working on some of them, but some will inevitably (and fortunately!) be built by the members of the community, which they look forward to supporting.