Cardano - widely hailed as the "third generation" of cryptos after Bitcoin and Ethereum, is now getting ready to take a major step in the right direction to potentially dethrone both of the older generations.

Very recently, IOHK, the organization behind the Cardano project recently announced a series of enhancements to the cross-chain functionality for decentralized finance (DeFi) applications being built on the network.

This upgrade in Cardano can be expected to bring about improved cryptographic features to Cardano while also improving its cross-chain decentralized application (dApp) development on Plutus - which is the smart contract platform of the Cardano network.

Read more: Cardano DeFi TVL crosses $100 million

Now, in its latest line of developments - the long-awaited Hydra protocol on the Cardano network has finally released its Proof-of-Concept for implementation for interested participants. This was a major step taken up by the blockchain network in an effort to greatly improve the network's scalability for the future.

Cardano has been one of the fastest blockchains out there, thanks to its strong peer-reviewed method of development - however it has had some problems with block sizes. While it is capable of producing a block every 20 seconds, the total number of transactions that can be recorded on each block tends to be quite limited.

This is a major impediment to the network's growth as it begins to see more user adoption across the board. This limitation will prevent growth beyond the point and thus effectively limit the user experience on the platform. Thus the need for the design of a new tool to help circumvent this scalability challenge on the Cardano network gained importance and thus Hydra was designed. Hydra protocol is designed in a way to work in an offline environment using the main Cardano blockchain as its core settlement layer.

Some of the most scalable blockchain protocols as of today only permit a few thousand transactions per second (TPS), but aren't the most efficient with the current technology. However, Cardano's Hydra projects could potentially achieve the 1 million TPS mark and help achieve its goal to become the most scalable layer-1 protocol in the market.

So how does Cardano's Hydra Head Protocol work?

According to a blog by Cardano Foundation, the "Hydra Head Protocol" is a scalability solution on Cardano that materializes as an open-source framework for the creation of off-chain ledgers and also aims to assist developers with using blockchain in a more efficient way. The Head protocol essentially presents an isomorphic layer-2 solution that belongs to the family of state-channel solutions.

This method helps to achieve the target of a million transactions per second for the Cardano blockchain network, while at the same time, the main transactions on the parent chain can run without a hitch and efficiently. The transactions on Hydra 'heads' are backed through Plutus Scripts, thus more than one transaction per time can be achieved in different Hydra Heads. It also has a series of other features and the SundaeSwap team has run a PoC on the protocol to showcase all the different kinds of features that the platform provides.

The Hydra Head Protocol solution for the Cardano network presents a very viable and promising solution to Cardano's vision for growth and adoption and to keep up with the needs of a growing user base by improving upon its scalability concerns. With these measures in place, Cardano can potentially revolutionize the broader ecosystem and become the gateway to powering micro-transactions for the e-commerce industry at large.

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