What do you think about having a horizontal scroll on the layers panel? I can’t see the name of the layers and usually widen the panel to be able to see, but since I use a 13", this makes the canvas smaller.
I would really improve the experience if it was possible to scroll horizontally in the layers panel. With frames and groups within other frames, the layers panel cuts off the underneath layers because of showing the hierarchy (which is nice!).
I then have to resize the layers panel to click the right layer leaving the canvas with minimum space.
Your suggestion does not factor that I am unable to see what the cursor is hovering over in the layers because it is indented too far for any visible characters.
I would have no clue what I’d be hiding or unhiding.
Using nested controls and nested auto-layouts (which is a more dynamic way to work) is unusable past a certain level of hierarchy.