diff --git a/hydra-chain-observer/hydra-chain-observer.cabal b/hydra-chain-observer/hydra-chain-observer.cabal
index 974f433d0c9..80ac1962edc 100644
--- a/hydra-chain-observer/hydra-chain-observer.cabal
+++ b/hydra-chain-observer/hydra-chain-observer.cabal
@@ -71,6 +71,7 @@ library
     , hydra-plutus
     , hydra-prelude
     , hydra-tx
+    , io-classes
     , optparse-applicative
     , ouroboros-network-protocols
     , retry
diff --git a/hydra-chain-observer/src/Hydra/Blockfrost/ChainObserver.hs b/hydra-chain-observer/src/Hydra/Blockfrost/ChainObserver.hs
index b07c017775d..d32fef44b68 100644
--- a/hydra-chain-observer/src/Hydra/Blockfrost/ChainObserver.hs
+++ b/hydra-chain-observer/src/Hydra/Blockfrost/ChainObserver.hs
@@ -9,7 +9,12 @@ import Blockfrost.Client (
   runBlockfrost,
  )
 import Blockfrost.Client qualified as Blockfrost
-import Control.Retry (RetryPolicyM, RetryStatus, exponentialBackoff, limitRetries, retrying)
+import Control.Concurrent.Class.MonadSTM (
+  MonadSTM (readTVarIO),
+  newTVarIO,
+  writeTVar,
+ )
+import Control.Retry (RetryPolicyM, RetryStatus (..), exponentialBackoff, limitRetries, retrying)
 import Hydra.Cardano.Api (
   BlockHeader,
   ChainPoint (..),
@@ -50,7 +55,7 @@ runBlockfrostM ::
   BlockfrostClientT IO a ->
   ExceptT APIBlockfrostError IO a
 runBlockfrostM prj action = do
-  result <- liftIO $ runBlockfrost prj action
+  result <- lift $ runBlockfrost prj action
   case result of
     Left err -> throwError (BlockfrostError $ show err)
     Right val -> pure val
@@ -93,26 +98,43 @@ blockfrostClient tracer projectPath startFromBlockHash = do
 
         let blockTime = realToFrac _genesisSlotLength / realToFrac _genesisActiveSlotsCoefficient
 
+        stateTVar <- newTVarIO (block, mempty)
         void $
-          retrying retryPolicy shouldRetry $ \_ ->
+          retrying retryPolicy shouldRetry $ \RetryStatus{rsIterNumber} -> do
+            -- XXX: wait on any iteration number, except 0 as it's the first try.
+            when (rsIterNumber > 0) $ threadDelay blockTime
             either (error . show) id
-              <$> runExceptT
-                ( do
-                    threadDelay blockTime
-                    loop tracer prj block networkId blockTime observerHandler mempty
-                )
+              <$> runExceptT (loop tracer prj networkId blockTime observerHandler stateTVar)
     }
 
+-- | Iterative process that follows the chain using a naive roll-forward approach,
+-- keeping track of the latest known current block and UTxO view.
+-- This process operates at full speed without waiting between calls,
+-- favoring the catch-up process.
 loop ::
   Tracer IO ChainObserverLog ->
   Blockfrost.Project ->
-  Blockfrost.Block ->
   NetworkId ->
   DiffTime ->
   ObserverHandler IO ->
-  UTxO ->
+  TVar IO (Blockfrost.Block, UTxO) ->
   ExceptT APIBlockfrostError IO a
-loop tracer prj block networkId blockTime observerHandler utxo = do
+loop tracer prj networkId blockTime observerHandler stateTVar = do
+  current <- lift $ readTVarIO stateTVar
+  next <- rollForward tracer prj networkId observerHandler current
+  atomically $ writeTVar stateTVar next
+  loop tracer prj networkId blockTime observerHandler stateTVar
+
+-- | From the current block and UTxO view, we collect Hydra observations
+-- and yield the next block and adjusted UTxO view.
+rollForward ::
+  Tracer IO ChainObserverLog ->
+  Blockfrost.Project ->
+  NetworkId ->
+  ObserverHandler IO ->
+  (Blockfrost.Block, UTxO) ->
+  ExceptT APIBlockfrostError IO (Blockfrost.Block, UTxO)
+rollForward tracer prj networkId observerHandler (block, utxo) = do
   let Blockfrost.Block
         { _blockHash
         , _blockConfirmations
@@ -151,11 +173,11 @@ loop tracer prj block networkId blockTime observerHandler utxo = do
       then [Tick point blockNo]
       else observationsAt
 
-  -- [7] Loop next.
+  -- [7] Next.
   case _blockNextBlock of
     Just nextBlockHash -> do
       block' <- runBlockfrostM prj (Blockfrost.getBlock $ Right nextBlockHash)
-      loop tracer prj block' networkId blockTime observerHandler adjustedUTxO
+      pure (block', adjustedUTxO)
     Nothing ->
       throwError (MissingNextBlockHash _blockHash)
 
diff --git a/hydra-chain-observer/src/Hydra/ChainObserver.hs b/hydra-chain-observer/src/Hydra/ChainObserver.hs
index a0dbfff7553..39289088bfa 100644
--- a/hydra-chain-observer/src/Hydra/ChainObserver.hs
+++ b/hydra-chain-observer/src/Hydra/ChainObserver.hs
@@ -23,4 +23,5 @@ main observerHandler = do
         follow networkId startChainFrom observerHandler
       BlockfrostOptions{projectPath, startFromBlockHash} -> do
         let NodeClient{follow} = blockfrostClient tracer projectPath startFromBlockHash
+        -- FIXME!
         follow (error "not-used") (error "not-used") observerHandler