Interhead Hydra: Two Heads are Better than One

Abstract

Distributed ledger are maintained through consensus protocols executed by mutually distrustful parties. However, these consensus protocols have inherent limitations thus resulting in scalability issues of the ledger. Layer-2 protocols operate on channels and allow parties to interact with another without going through the consensus protocol albeit relying on its security as fall-back. Prominent Layer-2 protocols are payment channels for Bitcoin that allow two parties to exchange coins, State Channels for Ethereum that allow two parties to execute a state machine, and Hydra heads [FC'21] for Cardano which allows multiple parties execution of Constraint Emitting Machines (CEM). Channels can be concatenated into networks using techniques such as Hashed Timelocked Contracts to execute payments or virtual state channels as introduced by Dziembowski et al. [CCS'18] to execute state machines. These constructions allow interaction between two parties across a channel network, i.e. the two endpoints of a path of channels. This is realized by utilizing intermediaries, which are the parties on the channel path which are in-between both endpoints, who have to pay collateral to ensure security of the constructions. While these approaches can be used with Hydra, they cannot be trivially extended to allow execution of CEMs between an arbitrary amount of parties across different Hydra heads. This work addresses this gap by introducing the Interhead construction that allows for the iterative creation of virtual Hydra heads. Of independent interest, our construction is the first that (1) supports channels with an arbitrary amount of parties and (2) allows for collateral to be paid by multiple intermediaries which allows to share this burden and thus improves practicality.