Cardano Hydra Update, Cardano Hydra layer-2 release

2023-05-23, 09:08

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![](https://gimg2.gateimg.com/blog/1679447253722320711jiami.jpeg)
The Hydra layer-2 protocol was launched on <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> blockchain on 11 May 2023.

The aim of the Hydra Update is to increase the scalability of the <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> blockchain.

Hydra layer-2 will reduce cost as well as increase throughput and transaction speed.

Currently, the <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> blockchain is operating at 94% capacity.

**Keywords**: Layer-2 protocol, <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> Hydra Update, <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> Hydra Release, <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> blockchain, layer-2 scalability solution, <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> Hydra layer-2 release
## Introduction 
One of the main challenges of  blockchains is that of scalability. When blockchains have scalability problems they encounter congestion which leads to slow transactions and high transaction costs.  In order to overcome scalability challenges some blockchains deploy layer-2 protocols that process transactions off-chain. This article discusses how <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a>’s Hydra update will assist the blockchain to reduce cost and increase its transaction speed. 
## Cardano Mainnet deploys Hydra layer-2 protocol
<a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> blockchain recently launched its Hydra Update to enhance its scalability which brings benefits like high throughput and transaction speed. Input Output Hong Kong (IOHK), which is the start-up behind the <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> protocol, shared the update on its Twitter account as shown below.  
![](https://gimg2.gateimg.com/image/article/16848326981.png)
Launch of Hydra Update - InputOutputHK

<a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> has followed the footsteps of other layer-1 blockchains like <a href="/price/ethereum-eth" target="_blank" class="blog_inner_link">Ethereum</a> which have improved their scalability and enhanced their usability through layer-2 upgrades. As a fact, [Hydra](https://www.gate.io/price/hydra-hydra/try "Hydra") is a layer-2 protocol that helps to maximize throughput and reduce latency as well as  costs.

<a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> Hydra release is important as it supports applications that solve real world problems. For example, <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a>’s second layer release means many decentralized applications can offer payment, identification, mobile and gaming services.

Also, <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a>’s layer-2 scalability solution enables the protocol to process transactions off-chain while using the main ledger as the settlement layer. Therefore, the security of all transactions that take place on Hydra [layer-2 protocol](https://www.gate.io/blog_detail/357/essentials-for-crypto-newbie-what-is-layer-0-layer-1-and-layer-2 "layer-2 protocol") is guaranteed by the <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> layer-1 chain. This upgrade can handle the different types of transactions which <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> performs.This is because they use the same signatures and transaction formats.

The deployment and proper functioning of the layer- scalability solution reduces entry barriers which attracts new customers to use <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a>’s infrastructure to develop various decentralized applications including DeFi wallets. Therefore, there is no doubt that this will increase <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> blockchain’s adoption and usability.

One of the focuses of <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> Hydra layer-2 release is on latency or the time that elapses before the confirmation of a transaction. <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a>’s aim is to achieve a latency of 20 seconds per block. Nevertheless, this is not the end of <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a>’s improvements as it is working on features that support Head protocol extensions and multiple heads per node, among others.

Read also: [The Development Status and Prospect of Layer 2 Protocol](https://www.gate.io/article/17440 "The Development Status and Prospect of Layer 2 Protocol")
## Competition among blockchains
As things stand, there is much competition among blockchains to increase their scalability and efficiency. Each blockchain wants to position itself as the best in the industry, thereby attracting many users.

<a href="/price/ethereum-eth" target="_blank" class="blog_inner_link">Ethereum</a>, for example, is [now the leading blockchain in this respect](https://www.gate.io/blog_detail/77/Ethereum-Layer-2-An-Upgrade-of-Scalability "now the leading blockchain in this respect") since it hosts several layer-2 networks like <a href="/price/optimism-op" target="_blank" class="blog_inner_link">Optimism</a> (OP) and Arbitrum (ARB) and <a href="/price/polygon-matic" target="_blank" class="blog_inner_link">Polygon</a> zkEVM. <a href="/price/solana-sol" target="_blank" class="blog_inner_link">Solana</a> (SOL), <a href="/price/aptos-apt" target="_blank" class="blog_inner_link">Aptos</a> (APT) , Arbitrum and SUI are some of the networks that are improving their services. As such, they all compete with each other. 
## Increase in Cardano Total Value locked
The crypto analytics firm, Messari, reports that <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> (ADA) witnessed a significant growth during the first quarter of 2023 when its total value locked (TVL) tripled following a string of technological breakthroughs. As an instance, the network adopted new stablecoins and improved its scalability. Also, it has enhanced virtual machine (VM) compatibility.

According to Artemis, [Cardano’s TVL](https://twitter.com/Artemis__xyz/status/1653746316269490176 "Cardano’s TVL") has been increasing during the past six months. It had its all-time-high (TVL) in November 2022 when it attained $400 million. Similarly, on 3 May <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a>’s seven-day moving average reached $154 million, a feat it last achieved in May 2022. 
![](https://gimg2.gateimg.com/image/article/16848328142.png)
<a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a>’s seven day moving average - Artemis

As you observe in the image, the seven-day moving average has been consistently high. The next diagram indicates a current seven day average TVL of $151.09 million. 
![](https://gimg2.gateimg.com/image/article/16848328283.png)
TVL average - Defillama

As <a href="/price/the-graph-grt" target="_blank" class="blog_inner_link">The Graph</a> denotes, <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a>’s TVL remains high. In fact, it gained 1.23% within the last 24 hours.

It is also important to note that during 2022 <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> registered much growth as well. Such a momentum continued into 2023. For example, <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> grew by 172% between Q3, 2022 and Q1 2023, from $50.8 million to $138.3 million. Specifically, the volume of stablecoins rose by 261% from $2.8 million in quarter 4, 2022 to $10 million at the end of quarter 1, 2023. The biggest stablecoin performers during that period were IUSD and Djed’s DJED.

More importantly, ADA, <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a>’s native token, gained 54% within the first quarter of 2023. At the time of writing, 20 May, it has a value of $0.36, having lost 1.03% within the last 24 hours. However, its uptrend came to an end on 19 May when it attained $0.371 with a trading volume of over $175 million. Hope is not lost, though, since it is showing signs of recovery. 
![](https://gimg2.gateimg.com/image/article/16848328414.png)
<a href="/price/cardano-ada" target="_blank" class="blog_inner_link">ada price</a> - Coingecko

Another interesting development was the growth of  ADA’s treasury by 61% from 100 million  to 1.21 billion in quarter 1. This represents 66% growth in terms of USD, as it increased from $278 million to $460 million.

Despite its gains in the above aspects, ADA  recorded some declines in other areas. For instance, it recorded a decrease of 71.5% in new addresses in the first quarter of 2023. Similarly, there was a 27% fall in the daily transaction volume and a 23% decrease in the number of daily unique buyers.

## Cardano operating at 94% Capacity

Another fascinating fact is the level of capacity the <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> blockchain is operating at. On 8 May Sebastien Guillemot, the Chief Technology Officer (CTO) of the Paima Ecosystem, said that the <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> blockchain is operating at 94% load. This means it still only has  6% to attain full capacity. 
![](https://gimg2.gateimg.com/image/article/16848328675.png)
<a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a>’s current capacity - SebastianGllmt

On the same Twitter thread, Guillemot explains the implications of <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a>’s current and future capacity. He says that the <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> blockchain does not prioritize any transactions. Instead, the transactions are executed on a first-come- first-served basis. This means that the transactions will be queued if  the blockchain is operating at 100%.

This also implies that if there is congestion on the network some of the transactions may not  appear on the blockchain. Nevertheless, the users whose transactions do not make it to the blockchain cannot pay any fees.

Read also: [How to Buy Cardano (ADA)](https://www.gate.io/how-to-buy/cardano-ada "How to Buy Cardano (ADA)")

## Conclusion

The <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> blockchain recently launched the Hydra Upgrade to increase its scalability, throughput and transaction cost. This development has come on the backdrop of strong performance by the network such as high total value locked (TVL). In addition, the blockchain is currently operating at 94% capacity.

## FAQs about Cardano’s Hydra layer-2 Update
### Is Hydra working with Cardano?
The Hydra layer-1 protocol that exists on the <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> blockchain increases its scalability and throughput. Therefore, the two work in conjunction to improve the overall performance of the <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> ecosystem. 
### Is cardano a layer-3 blockchain? 
<a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> is not a layer-3 blockchain. Rather, it is a layer-1 blockchain that has the capacity to host layer-2 protocols such as Hydra. 
### What is the Hydra protocol in Cardano?
The Hydra protocol is a layer-2 protocol that exists on the <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> blockchain. Hydra Update aims to increase the scalability of the <a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> network which brings several benefits like low cost and high transaction speed. 
### What layer blockchain is Cardano?
<a href="/price/cardano-ada" target="_blank" class="blog_inner_link">Cardano</a> is a layer-1 blockchain which hosts many decentralized applications. Therefore, it can also accommodate layer-2 blockchains and other protocols.

<div class="blog-details-info">
<div>Author:** Mashell C.**, Gate.io Researcher
<div class="info-tips">\*This article represents only the views of the researcher and does not constitute any investment suggestions.
<div>\*Gate.io reserves all rights to this article. Reposting of the article will be permitted provided Gate.io is referenced. In all cases, legal action will be taken due to copyright infringement.
</div>

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