Interhead Hydra: Two Heads are Better than One

Distributed ledger are maintained through consensus protocols which have inherent limitations to their scalability. 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. Channels can be concatenated into networks using techniques such as Hash Timelock Contracts (HTLC) to execute payments or virtual state channels as introduced by Dziembowski et al. [CCS’18] to execute state machines across a path of channels. This is realized by utilizing intermediaries, which are the parties on the channel path between both endpoints, who have to pay collateral to ensure security of the constructions. Dziembowski et al. [Eurocrypt’19] introduced multi-party state channels based on a virtual channel construction and more recently Hydra heads [FC’21] is a channel construction that allows multiple parties the execution of Constraint Emitting Machines (CEM). While existing protocols such as HTLCs can be extended such that two parties can interact with another across channels, there are no dedicated constructions that utilize multi-party channels and similarly allow more than two parties to interact across a network of channels. This work addresses this gap by extending Hydra and introducing the Interhead construction that allows for the iterative creation of virtual Hydra heads. Our construction is the first that (1) supports and utilizes multi-party channels and (2) allows for collateral to be paid by multiple intermediaries.