Paper 2026/2609

SoK: Optimization Tools for the Hydra Multiplayer Channel

Abstract

Blockchain technology allows parties to use a consensus protocol to add transactions and data to a decentralized ledger that are immutable. However, the amount of transactions that can be processed within a consensus protocol and thus added to the ledger within a given time frame is limited. This is a scalability issue. Layer-2 protocols are a class of approaches that process transactions off-chain, i.e. without involvement of the consensus protocol, but allow usage of the consensus protocol as a backup for security. This potentially reduces the processing of $n\in\mathbb{N}$ transactions to only $\mathcal{O}(1)$ transactions being committed to the ledger. The basic building blocks of Layer 2 protocols are Payment Channels, whereas newer protocols as Hydra (FC'21) allow for multi-party channels that are not limited to payments but can execute smart contracts, i.e. program code. There has been substantial research proposing tools and improvements to Layer 2 protocols, but most assume the original two party Payment Channel design. This makes it unclear to what degree existing techniques can be utilized with Hydra style multi-party channels. This work (1) presents a survey of such such existing two party channel protocols and tools built on top of them. We use a didactic approach with a focus on explaining their core ideas. (2) This work identifies uses cases for which novel protocols for Hydra should be developed. (3) This work analyzes open problems for Hydra, lists relevant related work and proposes which existing tools can be used to address them or serve as a starting point for further research.