For Cardano to become a global leader as a smart contract blockchain it will need to scale to meet the requirements of handling hundreds of millions of users.

Current scaling situation

Hydra is the leading project being executed by IOG to help Cardano scale the blockchain.

The first phase of Hydra will be available in 2022 however this initial implementation will not resolve all of the problems needed for Cardano to scale.

Sebastien from dcSpark recently discussed the importance of rollups and alternative solutions in an interview -

https://www.youtube.com/watch?v=4DslvkLop04

Need for more scaling options

To reach true decentralization the Cardano community will need to not rely on the input from IOG as much as it does now as we move into the future.

Hydra will only have it's initial implementation released early next year. Cardano faces potential scaling problems in 2022 as high demand protocols in DeFi, NFTs and gaming begin and continue being released. With alternative scaling solutions not in place there is a risk of overloading demand on the main chain.

Types of proposals encouraged

Proposers should consider new novel ideas or research, extensions of Hydra functionality or porting over solutions used in other blockchains that would be suitable for Cardano.

Proposers are welcome to focus on market specific scalability solutions - for instance a solution could focus on DeFi specifically with decentralized exchanges (DEX's) as a focus area or other growing markets that could benefit from novel scaling solutions.

Scalability topic areas:

• Rollups (e.g. zero knowledge rollups, optimistic rollups)
• Sharding
• Sidechains
• State channels

Size of proposals

Scaling solutions are inherently complex and require significant engineering effort. As a result proposers should not be discouraged from making proposals that request most of the challenge budget. A single proposal team is both welcome and encouraged to request the entire budget if they can demonstrate an articulated plan with the technical expertise to address the challenge of scaling solutions that are suitable for growing Cardano.

Budget rationale

High technical expertise is needed for scalability solutions. Projects will likely take many months of engineering effort to implement viable solutions.

Follow on funding rounds

If this this challenge setting gets voted in and the proposal(s) submitted show signs they can be impactful then a follow on challenge will be submitted for fund 9 with a larger requested budget to further help the team(s) be able to request further funding.

Why is it important?

Hydra will not solve every scaling problem in Cardano, more scaling solutions are needed as alternatives

What does success look like?

Scaling solutions that are introduced and implemented by the community that Cardano projects can start using

Key Metrics to measure

• Number of scaling solutions available to the community to use within their projects
• Number of projects launched on any of the new scaling solutions
• Novel ideas generated from research on different scaling approaches