Cardano Unveils Layer 2 Scaling Solution Hydra, Will It Pump ADA Price?

Key Insights

• Hydra is a whole family of protocols, each improving a specific aspect of the Cardano blockchain.
• Cardano appears to be struggling to break through a resistance that has remained strong for months.

The full hydra upgrade is almost here.

In a tweet from Charles Hoskinson, the Cardano co-founder mentioned that “Hydra” is coming to the Cardano mainnet. But what is the Hydra update, and why is it so important?

According to the Cardano docs, the Hydra update is a layer-2 scaling solution for the Cardano network aimed at increasing its transaction speeds, reducing latency, and increasing the network’s throughput.

Hydra is a whole family of protocols, each improving a specific aspect of the Cardano blockchain.

Like Polygon, Loopring and OMG are layer-2 solutions for the Ethereum network; Hydra is the layer-2 solution for Cardano.

Hydra Under the Microscope

According to a tweet about a new GitHub commit from the hydra chief developer, Sebastian Nagel, a new version of Hydra (0.8.0) has been released.

New release for Hydra: 0.8.0!🐉https://t.co/2U1P1qTaOT

Took a bit longer than last time but it's packed with features:
– Persistence of Head state
– Improved contestation deadline reporting
– Fixed several bugs in the hydra-node
– Improved UX of the hydra-tui
– Static binaries

— Sebastian Nagel (@ch1bo_) October 27, 2022

This new version is expected to feature fixed bugs in the Hydra node, improved Head State persistence, improved hydra-tui user experience, and much more.

According to Nagel, the new update will also feature transaction cost computation as a “min fee”. It will also start to report them in the transaction cost benchmark.

This release of the 0.8.0 version continues to push Cardano further to the release of the Hydra update’s version 1.0.

The Genius Yield Twitter account also commented on Nagel’s post concerning the new release, adding that the Cardano network will now have “multiple ways of scaling up”, and Hydra is bound to play a huge role in that regard.

We are moving ever closer to a 1.0 release. Keep up the good work team! #Cardano will have multiple ways of scaling up and Hydra will play a big role in that regard.

— Genius Yield official (@GeniusyieldO) October 27, 2022

Recall that the Alonzo update on the Cardano network was released in May 2021. It also added smart contract functionality to the Cardano blockchain.

However, smart contract functionality isn’t the only new feature the update added to the Cardano blockchain. The Hydra Layer-2 scaling solution is also one of the new changes made possible by the Alonzo hard fork. And it will be implemented by adding the layer-2 solution to the existing layer-1 Cardano blockchain.

Recall that in mid-October, SundaeSwap labs, the parent company behind the popular Cardano decentralized exchange, showed off their first demo of the SundaeSwap exchange on Hydra and referred to the layer 2 scaling solution as an “important milestone”.

SundaeSwap has expressed excitement about Hydra and has added that it is a huge leap for the decentralized exchange and Cardano’s journey toward creating a highly scalable network.

Cardano Price Analysis

Cardano appears to be struggling to break through a resistance that has remained strong for months.

Chart showing Cardano’s retest of the $0.42 resistance | Source: Tradingview

Cardano hit a $0.33 low last week. It has started to trend upwards ever since, in what appeared to be lethargic price action.

However, this week has been a generally bullish one for cryptocurrencies in general, and Cardano’s bulls appeared to have gained all the energy they needed to push the price further upward.

Chart showing price action on Cardano over the week | Source: Tradingview

Zooming in,  Cardano was seen consolidating around the $0.3496 resistance (yellow line) at the start of the week and exploded to the upside along with the rest of the market.

On Tuesday, the cryptocurrency hit the $0.42 resistance (upper blue line), retested it on Wednesday, and now appears to be in the middle of a reversal. It is currently retesting the $0.385 support (red line) and may consolidate for a while before further price action.

Chart showing the RSI on Cardano’s chart | Source: Tradingview

The signal line of the RSI is also close to the overbought territory and illustrates support for Cardano’s consolidation. The MACD line is below the signal line, indicating that the bears are currently in control of the market.

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