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As I understand Hydra protocol has two main components:

  1. Hydra Head protocol
  2. Hydra Interhead protocol

Does any of these components require changes to current consensus protocol? If not, how will it be implemented? My guess is as a smart contract + some network communication protocol (possibly p2p).

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No.

Hydra is a layer-two solution which works "on top of" Cardano. A hydra-node which implements the Hydra Head protocol will run alongside the cardano-node and provide an isomorphic state channel which has the same transaction format and ledger rules as Cardano, but with a much simpler consensus. The fact that not the whole network needs to agree to reach consensus in a single Hydra Head, but only the participants of a particular Head, makes this faster & cheaper than to process transactions on the mainchain.

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    Small addition: while it may not require changes in the current consensus protocol, Hydra makes heavy use of Plutus smart validators and it may require changes in the Plutus core built-ins to cope with fancy crypto and fancy structures used to manage the Hydra head on-chain state.
    – KtorZ
    Nov 26 '21 at 9:30
  • Also, as I understand it, Hydra subnetworks will be capable of their own consensus/trust models, as well as their own ledger models.
    – nomad0
    Nov 26 '21 at 18:03

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