Developed alongside Cardano, Hydra was designed to prevent any scalability issue that might arise as the network grows in usage and adoption.
Scalability is one of the biggest problems the crypto industry is facing today. The unprecedented growth the industry has seen has made using DeFi a slow, expensive, and risky endeavor that has been pushing users towards more centralized platforms.
And while Layer 2 networks emerged as a perfect solution to this problem, most of them have been designed as a method for damage control, rather than a complementary addition to a blockchain.
Cardano’s Layer 2 scalability solution was built before problems occurred
This, however, isn’t the case with Cardano (ADA). Its parent company IOHK took a different approach to expand the blockchain’s capacity—designing a Layer 2 scaling solution alongside the blockchain.
Its native scalability solution, called Hydra, was designed to address the biggest issues blockchain networks face when dealing with high throughput. Firstly, the network needs to strike a balance between setting fees low enough to satisfy its users and setting them high enough to deter potential Denial-of-Service (DoS) attacks. Secondly, the network also needs to ensure that it doesn’t face storage problems as its transaction history log grows with increased usage.
Hydra manages to address all of these concerns by providing the network with a more efficient means of processing transactions. It enables most of the transactions to be processed off-chain and uses the main-chain ledger as the secure settlement layer.