- IOG has collaborated with MLabs10 for the creation of a reference implementation of an auction using Hydra protocols.
- As a layer 2 scaling solution, Hydra offers a variety of benefits for digital assets auctions.
The engineering company known as Input and Output Global (IOG), popular for creating the Cardano blockchain, is partnering with Blockchain and fintech consultancy firm MLabs10, to create a reference implementation of an auction, by using the Hydra head protocol to facilitate the development.
In a recent blog post from one of Cardano’s medium pages, the announcement notes that the partnership will kick off with the introduction of a paper that lays out the steps required for the implementation stage, along with pros, cons, and hindrances of running auctions on Hydra.
Find out more 👇 https://t.co/IdKoCeOZZ9
— Input Output (@InputOutputHK) January 22, 2023
Decentralized auctions, also known as blockchain auctions, are a more sustainable alternative to physical auctions for a myriad of reasons. Some benefits include stronger data security, along with the exclusion of a centralized body in charge of the auctions.
There are also no third parties needed to facilitate transactions, and data stored from each auction is made transparent and immutable. Blockchain auctions are enabled by smart contracts, which help buyers and sellers seamlessly carry out transactions.
This collaboration aims to demonstrate the feasibility of the current implementation of the Hydra Head protocol to develop auction applications. The proposed reference implementation also constructively determines and aligns the Hydra Head protocol design with the concrete use cases in the Cardano ecosystem.
How Hydra can help facilitate blockchain auctions
Hydra is a scalability solution that runs on Cardano. It functions as an open-source framework that aids the creation of edgers that are built off-chain, while also helping developers utilize blockchains more efficiently.
Hydra is especially useful for digital asset auctions, because of its layer 2 scalability solutions, which outperform the layer 1 scaling solutions.
When compared to the Cardano main chain (layer 1), the hydra head channels (2), provide benefits that include cheaper transaction fees or no transaction fees at all. With cheaper fees, bidders, auction houses, and sellers pay a significantly lower price than they would on the Cardano layer 1 chain.
The hydra head channel also allows for increased transaction speed, which then results in an increased high bidding frequency during auctions.
Explaining Hydra’s potential effect on the auction process, the blog post explained that ;
Cardano can run different auction types using the Hydra Head protocol. Auction designs on a single Head can cover basic single-head auctions, single-head secret auctions, delegated custodial auctions, voucher auctions, or delegated voucher auctions. Auction designs on networks of Hydra Heads can cover such cases as star-shaped auctions or constellation schema auctions.
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Team members behind the project have chosen to use a delegated voucher auction design and core English-style auction features for the reference implementation.
The auction’s design will present both sellers, bidders, and buyers with many notable features using Hydra, throughout the auction process.