One of the big attractions with Cardano, and what sets it apart from other crypto projects, is the scientific, peer-reviewed and evidence based approach that underpin the Cardano research and development processes.
Scaling distributed systems, like a distributed ledger, is complicated. For example there isn't a globally shared memory in the system. Data is scattered across nodes. As a result there is no single version of the truth in all parts of the system at any given time.
Throughput will never be sufficient enough to enable a large number of users to transact in a distributed consensus ledger network. Solving this scalability problem is the holy grail, not only for Cardano, but for the crypto space in general.
A solution to this problem is required for Crypto and DeFi to be successful!
Consistency, Availability, and Partition Tolerance need to work in harmony for distributed systems to work well. The truth is that this harmony is very hard to achieve. One common "solution" is to sacrifice one of these three pillars in favour of the other two. For example by providing fast and complicated transactions by storing large data sets on each node.
Hydra is Cardano's scaling solution to these issues. It's a result of a five years long scientific research process, which has been peer-reviewed, and deemed scientifically proven to address the issues of scaling a distributed ledger.
For the more technical reader Hydra scales out horizontally by inheriting the on-chain state in a separate off-chain compute unit called a Hydra head. Furthermore, the extended UTxO model used by Cardano is the same on-chain and off-chain. As a result chain state updates are allowed off-chain without the need to keep transactions in sequence, as long as these transactions are independent of each other.
It allows sharding of stake space without the need to shard the ledger itself and enables independent transactions and smart contracts to run in parallel and only write the final outcome of these transactions back to the on-chain ledger.
IOHK's experimental tests, carried out by Edinburgh University, showed that one Hydra head can process around 1000 tx/s. With 2624 Hydra heads running in parallel, one for each stake pool at the time of writing, Cardano can achieve more than 2.6 million tx/s. For comparison Bitcoin can process around 4.6 tx/s and Visa can process up to 24k tx/s at peak times.
What we get is a safe and proven method of using a distributed ledger (UTxO model) with high transaction throughput, low latency, and minimal storage requirements per node while keeping transaction fees very low.
Elegant and smart! And a scientific achievement!
XOR N₳ND will continue to run the Cardano network. Please consider staking with a single pool operator like XORN. In addition to supporting XOR N₳ND, you will also help keep the Cardano network decentralised and healthy.