IO & Midgard Labs: L2 Scalability Initiative
**Proposal as pdf: [https://ipnso-com.ipns.dweb.link/?cid=QmYfHrmfTKYGK9YR95ewXSwEruEfGPAtpnp1qwoEUekJa7](https://ipnso-com.ipns.dweb.link/?cid=QmYfHrmfTKYGK9YR95ewXSwEruEfGPAtpnp1qwoEUekJa7)** Cardano's current L1 infrastructure — two-hour finality, \~$0.17 per transaction, and \~7–10 TPS, systematically disqualifies it from high-performance verticals such as DeFi, AI agent micropayments, gaming, and consumer payments before a technical evaluation even begins. Upcoming L1 upgrades (Leios, Peras) will strengthen the base layer will not alone meet the requirements of zero-fee or sub-second use cases. Layer 2 infrastructure is the only path to closing this gap in the current cycle. This proposal, led by Input Output in partnership with Midgard Labs, delivers three complementary workstreams: shared L2-agnostic infrastructure (a data availability solution benefiting all current and future Cardano L2s); production hardening of Hydra, including performance optimization, operational tooling, and DeFi reference implementations to support live adopters Delta DeFi and Masumi; and the mainnet launch of Midgard, Cardano's first permissionless optimistic rollup, targeting 10,000+ TPS and sub-$0.01 fees for open-participation applications. Hydra and Midgard are not competing solutions — they address distinct trust models and together cover a far broader range of use cases than either could alone. L2s grow the Cardano ecosystem rather than cannibalize it. Activity on Hydra and Midgard anchors back to L1 through block publication and settlement, generating protocol revenue that would otherwise flow to competing ecosystems. Midgard's architecture additionally includes a mechanism to route a portion of sequencer revenue to the Cardano treasury, creating a durable, non-speculative economic relationship between L2 growth and ecosystem sustainability. By supporting the first wave of production adopters now, this proposal establishes the reference deployments and developer confidence needed to compound ecosystem growth through subsequent cycles.. **Treasury Ask:** ₳10,425,871
Reasoning
Written after the vote was cast
What this asks for, and from whom
IO and Midgard Labs asked for 10,430,000 ADA for the L2 Scalability Initiative.
What would have to be true for this to be a good use of treasury funds
Layer 2 scalability is a survival question. Throughput determines which chains handle real usage and which ones become academic exercises, and I have been consistent that interoperability and throughput are the long-term differentiators.
What specifically concerns me
Cardano has funded multiple parallel layer 2 efforts. At some point the ecosystem needs to consolidate behind what is working rather than funding every promising direction simultaneously, because fragmented scaling is barely better than no scaling.
What I am asking of the proposer if this passes
It was dropped. My ask for the whole L2 category: show adoption, not architecture. Which applications moved real volume onto your layer 2. That is the only comparison that should decide future funding between competing approaches.