Cardano’s layer 2 solution Hydra is imminent as ADA on-chain activity explodes

  • Cardano crossed 2 million wallets, a key milestone for the Ethereum-killer.
  • Founder Charles Hoskinson states that layer-2 solution (Hydra) is necessary for growing traffic on the ADA network. 
  • Institutional investment flows in ADA hit $5 million over the past week, signaling a rise in demand for Cardano. 

Cardano’s native token ADA’s utility is likely to increase with a spike in daily active wallet users and transactions in the network. Charles Hoskinson stresses the importance of “Hydra,” Cardano’s layer-2 solution. 

Cardano prepares for scaling solution Hydra 

Cardano’s Alonzo upgrade added smart contracts capability to the Ethereum-killer network. Developers behind Cardano anticipated a spike in traffic on the network since the launch of smart contracts. 

In September 2021, Cardano discussed adding a layer-2 solution, Hydra, to boost the ADA network’s scalability. High transaction fees have plagued the Ethereum network for a long time, driving developers and users to Cardano. Hydra is expected to regulate the fee rate on the Cardano blockchain and tackle the menace of high fees. 

Charles Hoskinson, the Founder of Cardano, explains that it has become a high priority to pour more resources into Hydra. Once Cardano’s DeFi community directs higher volume transactions to the network, Hoskinson says, 

Cardano is going to get hammered by an enormous amount of traffic. Hydra is a necessity for that.

Proponents argue that Cardano is living up to its reputation as an Ethereum-killer. The altcoin announced earlier today that it had crossed 2 million wallets, a key milestone. 

Number of Cardano wallets

The increasing capital inflow from institutions fuels the rise in demand for Cardano. In the last week of October 2021, Cardano funds noted an inflow of $5 million from institutional investors. 

72% of Cardano’s circulating supply is staked. The percentage of supply staked has been on the rise since the successful implementation of the Alonzo hard fork. An increase in staked supply reduces the circulation of ADA tokens, fueling the Cardano price rally. 

Source: FXStreet

Incoming Hydra Upgrade Will Bring Scalability To Cardano Blockchain.

  • Cardano, having launched Alonzo, now aims to deploy Hydra.
  • Hydra is a layer 2 scaling solution that will make the real-world application of Cardano possible.
  • Development of Hydra to be discussed during Cardano Summit 2021.

There are quite a number of exciting developments happening in the Cardano network. The Alonzo upgrade that happened recently was a significant milestone in the Cardano journey. With it, the network can deploy base-level scripting capability for smart contracts that will, in turn, enable further innovation and network development. 

Having achieved this feat, the next milestone the network is aiming to reach is the deployment of Hydra, a key layer-2 solution to further improve Cardano’s scalability by layering a new protocol on top of the existing layer 1 blockchain. According to Charles Hoskinson, Hydra is already in development on the Alonzo hard fork. 

In an explanatory video, David Orr of IOHK asserts that while Cardano can and does change transaction fees to balance costs, it cannot keep transaction costs low enough for micro-payments to be feasible with just its base layer. He notes that Cardano cannot also handle storage problems that will arise from the growing storage of transaction history, on just its layer 1. Hence the necessity for Hydra.

With Hydra, the network aims to maximize throughput and minimize latency while incurring low to no costs, and greatly reducing storage requirements. It will do this by providing a more efficient means of processing transactions off-chain for a set of users while using the main-chain ledger as the secure settlement layer. This will also ensure that Hydra keeps security guarantees while remaining loosely coupled to the main chain. 

While many speculate that the deployment of Hydra will see the blockchain reach a throughput of millions of transactions per second, the developers at IOHK have stated that the figures are just aspirational targets and may not be the actual figures.

“Terms like ‘one million TPS (transactions per second)’ have been used before. It is a bold number, and while this remains as an aspirational target, the ultimate goal of any system is the flexibility to grow capability with demand.” 

However, they remain optimistic that the addition of an increasing number of Hydra on the network will improve user experience on the entire network.

“In principle, by adding increasing numbers of Hydra heads to the system, arbitrarily high throughput can be achieved by the system as a whole.”

Currently, the development team is focused on building the hydra-node and the Hydra Head protocol until it becomes “a solid and stable foundation for the community (and us!) to build real-world applications.” It is expected that Hydra development will also be a key subject of discussion at the Cardano summit 2021 taking place between September 25 and 26.

Source: ZCrypto