Hydra
Unbundled resubmission of L2 Scalability initiative, enabling high-performance applications on Cardano through production hardening and performance improvements of Hydra v2.
The team behind the initiative
The opportunity
Hydra is the only production-grade Layer 2 (L2) on Cardano, and it is already running live workloads for Delta DeFi, Masumi, Intersect, Vtechcom and others. It gives Cardano what high-performance applications need to run natively: sub-second finality, near-zero transaction fees, and high parallel throughput, with Cardano Layer 1 (L1) as the security and settlement backstop.
Due to its focus on decentralization and security, Cardano L1 takes minutes to hours to finalize a transaction and costs around $0.17 per transaction. Competing ecosystems offer sub-second finality and sub-cent fees, so builders driving the current and next wave of adoption exclude Cardano at the selection stage, before they ever evaluate its strengths. L1 upgrades such as Leios and Peras will expand the base layer, but they are not yet available and, by the constraints of the scaling trilemma, cannot reach the zero-fee, sub-second, high-throughput envelope that high-performance applications require.
This proposal is a focused resubmission. The earlier Layer 2 proposal combined three initiatives: Hydra, Midgard, and a shared data availability layer. Community and DRep feedback was clear that standalone proposals are easier to evaluate and govern, and we took that on board. What follows is a standalone Hydra proposal at roughly one-third of the original ask.
The Initiative
Hydra
This proposal funds four workstreams that harden Hydra v2 into a feature-complete production platform: one that existing builders can rely on and new builders can adopt:
- Performance optimization: 2x to 10x improvements in snapshot signing speed and memory profile, plus on-chain contract optimization that lowers Layer 1 settlement fees. A public benchmarking suite gives builders credible, defensible numbers to design against.
- Operational excellence: operator runbooks, simpler node configuration, observability and logging, and an improved text-based user interface (TUI), so teams can run Hydra heads reliably in production and recover quickly from incidents.
- Ecosystem support: shipping the specific features production users have requested, facilitating the Hydra Alliance and Working Group, and running hackathons, workshops, and developer relations to grow the builder base.
- Maintenance and developer experience: continuous integration (CI), tooling improvements, and technical debt reduction across Q3 and Q4 2026 to keep the protocol healthy and safe to change.
Treasury ask: โณ5,100,781
Who is building
This initiative is led by Sharan Konerira at Input Output (IO), delivered by IO engineering.
Adoption is a shared effort across the ecosystem. IO is working with
- the Hydra Working Group to build against real user requirements
- the Cardano Foundation on distribution
- VTechcom on managed Hydra heads that make builder adoption easier
- MeshJS and VTechcom are building software development kits (SDKs) for Hydra
Expected outcomes
- Live users, Delta DeFi, Masumi, Blockfrost,ย Intersect, Vtechcom and others can scale on Cardano instead of hitting performance ceilings or migrating to competing chains
- New high-performance verticals become viable on Cardano: institutional and perpetual trading venues, agent-to-agent commerce and micropayments, gaming, and point of sale.
- Value is retained in the ecosystem: activity that is impossible on L1 today stays on Cardano, locking TVL on L1, growing monthly active users through on-chain wallets, and generating L1 settlement transactions.
- A foundation for adoption: a hardened L2 lowers the perceived risk that currently leads builders to exclude Cardano at the selection stage.
Ecosystem Impact
Why this funds Cardano's future, not just Hydra
Attracts new builders: without a competitive L2, builders exclude Cardano before they reach its strengths of security, decentralization, the eUTXO model, and formal verification.
Grows the pie: Hydra applications generate activity that is economically impractical on L1 today. Without Hydra, that activity goes to Solana or Ethereum L2s; with Hydra, it stays on Cardano.
Funds the treasury: every Hydra head open, addition and removal of funds, and head closure triggers L1 transactions and L1 fees. Where a head charges non-zero internal fees, the application can be designed to route a portion to the L1 treasury on settlement. As usage scales, L1 revenue scales with it.
Protects prior investment: years of R&D have made Hydra the most mature L2 on Cardano. This funding converts that investment into sustained adoption.
KPI and pillar alignment: This proposal advances the treasury KPIs for TVL, monthly active users (MAU), monthly transactions, throughput capacity, reliability and uptime, and annual protocol revenue. It aligns with Pillars 1 (Infrastructure and Research Excellence), 2 (Adoption and Utility), 4 (Community and Ecosystem Growth), and 5 (Ecosystem Sustainability and Resilience).
Governance links
Formal treasury proposal
The on-chain submission, read the full proposal text and rationale.
View the formal proposalJoin the Conversation
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