Hydrozoa L2: Pilot-ready Reliability and Performance

[Proposal setup] Proposal title

Please provide your proposal title

Hydrozoa L2: Pilot-ready Reliability and Performance

[Proposal Summary] Budget Information

Enter the amount of funding you are requesting in ADA

100000

[Proposal Summary] Time

Please specify how many months you expect your project to last

7

[Proposal Summary] Translation Information

Please indicate if your proposal has been auto-translated

No

Original Language

en

[Proposal Summary] Problem Statement

What is the problem you want to solve?

Hydrozoa MVP (fund 12) validated its design as a lightweight hydra head. Projects are excited to use it as an L2 workhorse, but we must boost its reliability, performance, observability for adoption.

[Proposal Summary] Supporting Documentation

Supporting links

• https://cardano-hydrozoa.github.io/hydrozoa/hydrozoa.pdf
,
• https://github.com/cardano-hydrozoa/hydrozoa
,
• https://milestones.projectcatalyst.io/projects/1200059

[Proposal Summary] Project Dependencies

Does your project have any dependencies on other organizations, technical or otherwise?

No

Describe any dependencies or write 'No dependencies'

No dependencies

[Proposal Summary] Project Open Source

Will your project's outputs be fully open source?

Yes

License and Additional Information

Apache License, Version 2.0 (http://www.apache.org/licenses/LICENSE-2.0)

[Theme Selection] Theme

Please choose the most relevant theme and tag related to the outcomes of your proposal

Layer2

[Campaign Category] Category Questions

Mention your open source license and describe your open source license rationale.

We use the Apache License, Version 2.0 (http://www.apache.org/licenses/LICENSE-2.0)..)

We have posted the corresponding copyright notice in our repository: https://github.com/cardano-hydrozoa/hydrozoa/blob/main/NOTICE.

How do you make sure your source code is accessible to the public from project start, and people are informed?

We use a single, public Github repository: https://github.com/cardano-hydrozoa/hydrozoa

This is the same repository that we have used since the beginning of the Fund 12 Hydrozoa project, and we have consistently referred to it in every milestone delivery and project-update video.

We also link to it in our socials.

How will you provide high quality documentation?

Our 54-page technical specification for Hydrozoa MVP from Fund 12 is already among the most detailed protocol documents in Cardano.

Furthermore, we will extensively document to a similar level the deliverables of this Fund 14 project.

[Your Project and Solution] Solution

Please describe your proposed solution and how it addresses the problem

As a result of the Hydrozoa fund 12 project (currently completing its final milestone), we have a detailed and well thought-out protocol design validated by a solid prototype. In particular, with our prototype, you can:

• Initialize a multi-party head (i.e. like Hydra) with a single, cheap L1 transaction (~0.19₳ fee).
• Create many pending deposits in parallel for the head (~0.18₳ fee per deposit).
• Use settlement transactions to simultaneously absorb many deposits into L2 and release unlimited withdrawals from L2 (~0.19₳ on average for a typical settlement tx).
• Enjoy rapid L2 transaction confirmation times even if funds are flowing into/out of the head.
• Avoid worry about peer state divergence (impossible by design) and disk usage bloat.
• Dynamically change the set of peers (if they all agree) without closing the head. (This feature is currently being completed in the final F12 milestone)

With these features, Hydrozoa is already enticing for early-adopters to try it — several projects have already privately approached us. However, it will likely not be the smoothest journey and may require significant support from the Hydrozoa core team to guide adopters. In this F14 project, we will empower adopters to be more self-sufficient by improving Hydrozoa's reliability, observability, troubleshooting capabilities, and deployment processes.

[Your Project and Solution] Impact

Please define the positive impact your project will have on the wider Cardano community

Hydrozoa's features make it very appealing as a simple middleware L2 solution to drive higher throughput, faster finality, and a better user experience for Cardano dApps. However, the outcome of L2 pilots will, to a great extent, be determined by the reliability and stable performance of the L2-enabled dApps. Adoption will falter if there are frequent outages, cryptic errors, or performance bottlenecks.

If we succeed in this project, Cardano builders will have an off-the-shelf middleware L2 solution that they can easily and confidently integrate into their tech stacks to delight users with experiences previously infeasible in Cardano.

A new generation of point-of-sale systems (like RareEvo's L2 vending machine), L2 gaming, micropayments, bridges, DEXs, oracles, and governance systems will elevate Cardano's value for the real world.

[Your Project and Solution] Capabilities & Feasibility

What is your capability to deliver your project with high levels of trust and accountability? How do you intend to validate if your approach is feasible?

We have designed and implemented the Hydrozoa protocol from a vague idea to the promising MVP prototype it is now. As reported in our F12 milestone reports, we have done so with good planning, transparency, technical competency, and a thorough attention to detail.

• https://milestones.projectcatalyst.io/projects/1200059/milestones/1/poa-1
• https://milestones.projectcatalyst.io/projects/1200059/milestones/2/poa-2
• https://milestones.projectcatalyst.io/projects/1200059/milestones/3/poa-3
• https://milestones.projectcatalyst.io/projects/1200059/milestones/4/poa-4

We will bring the same professionalism to this F14 project. Furthermore, we will leverage our team's extensive experience with software testing, distributed protocol design, data engineering, and software optimization to deliver on the project's objectives.

This project is very feasible:

• Hydrozoa's design and architecture is well-understood and mature.
• Our implementation decisions in the existing prototype were taken with this reliability and optimization in mind as a follow-up.
• Testing, observability, and optimization have standardized and straight-forward methodologies.

[Milestones] Project Milestones

Milestone Title

Architecture, Minimal Testable Version

Milestone Outputs

1. Specification & architecture:
   1. Data/observability layer
   2. Actor model
   3. Recovery protocol
   4. Testing framework
   5. Performance-tuning framework
2. Multisig regime: extended happy-path simulations
3. Baseline observability:
   1. /health and /ready endpoints
   2. structured logging in persistent data systems
4. CI/CD: deterministic builds
5. Conformance: unit + property + E2E happy path tests
6. Documentation

Acceptance Criteria

1. The specification and architecture documents for the project provide detailed descriptions of the data/observability layer, actor model, recovery protocol, testing framework, and performance-tuning framework.
2. The multisig regime simulations cover a range of random happy-path scenarios with a variable number of events.
3. The health and readiness of the hydra node can be determined with the endpoints, and the structured logs can be used to understand the node and head's event history.
4. The CI/CD systems build the project deterministically.
5. The unit, property, and E2E happy-path tests are implemented.
6. Documentation is provided for all outputs of this milestone.

Evidence of Completion

The proof of achievement

1. Link to the document delivering Output 1 of this milestone and briefly describes how it meets the acceptance criteria for that output.
2. Links to the open-source project repository and project board.
3. Links to a brief video describing the outputs delivered in this milestone.

Delivery Month

2

Cost

30000

Progress

30 %

Milestone Title

Minimal Usable Version

Milestone Outputs

1. Improved initiation ceremony scripts.
2. Multisig regime - full lifecycle coverage.
3. Reliability protocol: crash safety and crash recovery with minimal data loss.
4. Conformance: expand E2E test coverage.
5. Devnet and packaging:
   1. docker image + docker compose
   2. single-command local devnet
6. Documentation update

Acceptance Criteria

1. Head initiation ceremony handles more known edge-case scenarios that may arise during peers' negotiations about initial head membership, L2 protocol parameters, etc.
2. Simulations cover multisig regime and possible transitions into the rule-based regime.
3. Reliability protocol improves the crash safety and minimizes data loss during crash recovery.
4. E2E test coverage is expanded.
5. The docker image and docker-compose configuration provide an easy way to deploy a Hydrozoa head on a local devnet.
6. Documentation is updated to cover the outputs of this milestone.

Evidence of Completion

The proof of achievement:

1. Links to the open-source project repository and project board.
2. Links to a brief video describing the outputs delivered in this milestone.

Delivery Month

4

Cost

30000

Progress

60 %

Milestone Title

Minimal Loveable Version, base-line performance

Milestone Outputs

1. Simulations of rules-based regime and edge cases
2. Reliability hardening: deterministic messaging & timers; back pressure, queue
3. Conformance: fuzz tests for message/state transitions
4. Benchmarks / baseline performance
5. Observability: expanded metrics support; basic dashboards
6. Public testnet deployment
7. Operator runbook v1
8. Documentation

Acceptance Criteria

1. Simulations cover a wider range of rules-based regime scenarios and edge cases.
2. Deterministic messaging, timers, back-pressure, and queues are implemented.
3. Fuzz tests provide sufficient coverage for L2 messages and state transitions.
4. Benchmarks cover the main optimization targets described in the project specficiation.
5. Expanded metrics and dashboards provide essential information about a running Hydrozoa head.
6. Hydrozoa has been successfully deployed on a public testnet.
7. The operator runbook provides clear instructions for deploying and operating a Hydrozoa head.
8. Documentation is updated to cover the outputs of this milestone.

Evidence of Completion

The proof of achievement:

1. Links to the open-source project repository and project board.
2. Links to a brief video describing the outputs delivered in this milestone.

Delivery Month

6

Cost

25000

Progress

90 %

Milestone Title

Performance Tuning & Closing

Milestone Outputs

1. Hardening pass:
   1. basic DoS protection
   2. back-pressure tuning
   3. safe persistence defaults
   4. secrets handling
2. Observability
3. Performance tuning
4. Documentation finalisation
5. Close out report and video

Acceptance Criteria

1. The hardening pass has improved Hydrozoa's DoS protection, back-pressure parameters, persistence defaults, and secrets handling.
2. Hydrozoa's observability features cover all essential aspects of a head's lifecycle. It can reproduce the L2 state of the head at any L2 block number, up to the earliest block still available after log compaction.
3. Tangible performance gains achieved.
4. Documentation covers all outputs delivered in this project.
5. Close-out report and video satisfy Catalyst's requirements.

Evidence of Completion

The proof of achievement:

1. Links to the open-source project repository and project board.
2. Links to a brief closeout report and video describing the outputs delivered in this project.

Delivery Month

7

Cost

15000

Progress

100 %

[Final Pitch] Budget & Costs

Please provide a cost breakdown of the proposed work and resources

• Subtotal expected hours: 1,620 hr
• Contingency budget (10%): 162 hr
• Total hours: 1,782 hr
• Hourly rate: 75 USD/hr
• Total fiat: 133,650 USD
• Expected ADA price: 0.75 USD/ADA
• Total ADA: 100,237.50 ADA

[Final Pitch] Value for Money

How does the cost of the project represent value for the Cardano ecosystem?

The costs described in this proposal's budget breakdown have been developed based on a detailed plan of the activities required to achieve the milestones. We have high confidence in the comprehensiveness and accurate sizing of these activities, as we have engaged in very similar projects at the complexity level and subject domain in the past.

The ADA amounts for the developers on the team are commensurate with the amount of effort that the team members will contribute to the project. They are consistent with those that we and our fellow developers in the smart contracts and dApp sector have used in past projects to provide high-quality services, with a proven track record of delivering projects despite the complexity of viable applications in this space. This requires experts on staff with a diverse range of niche skill sets and deep knowledge of the Cardano and L2 protocols, the EUTXO model, and the modern practices of dApp design.

[Required Acknowledgements] Consent & Confirmation

Terms and Conditions:

Yes