Lydia comes from a clan that hunted unicorns, to harvest their horns, until the Sentient Rights Act was passed in 913. Ever since Tanquers became aware of the existence of unicorns, toward the end of the sixth century, there has been a superstitious belief among many people that their horns (called "alicorns") contained trace amounts of mana, thus giving them magical properties. And so alicorn powder, as well as goblets made from alicorns, became much sought-after products. For generations, Lydia's family were among the leading suppliers of these products. However, since the passing of the Act which granted unicorns (and various other mythical creatures) equal rights with humans, their business has greatly declined. Officially, in fact, the business no longer exists; however, it is believed that the clan may now secretly sell such products through the Illuminati.
In 904, when the surname law was passed, Lydia's clan chose the name "Hornpowder," for obvious reasons. While some members of the clan have chosen, since the SRA was passed, to change their surname, considering it a mark of shame, others have chosen to retain it, considering it either too much of a hassle to bother changing legally, or else believing the name will one day become an historical curiosity, in the coming generations.
In 897, at the age of 16, Lydia was going through a rebellious streak, and decided to upset her parents by joining a local street gang, the Stags. In 901, LandOrder acquired a branch in Tanq, when Barrie, leader of the Sea Monogs, joined the inter-village gang. After that, the various other street gangs in the village began thinking about disbanding, knowing they couldn't compete with the likes of LandOrder. However, in 902, Lydia became the leader of the Stags, and began organizing the remnants of the other small-time gangs in Tanq, which unified to form a new branch of InterGang, with Lydia as its don. But it is said that there has never been much open conflict between InterGang and LandOrder in Tanq, as Lydia and Barrie feel a certain empathy toward each other.
In 912, Lydia was fired by the capo of InterGang, Amelia Mysshroudedtery. She was subsequently recruited by Larami Illuminatus, don of InterGang's Tonad branch, to join her in her plan to secede from InterGang and start her own inter-village gang, the Illuminati. Soon after that, any gangsters in Tanq and Tonad who remained loyal to InterGang were transferred by the capo to Plist, when she decided, at least for the foreseeable future, to give up on Tanq and Tonad as viable branches of InterGang.
It is believed that at some point, Lydia reconciled with her clan, probably within a few years of joining the Stags. (It's also said that they offered her a position in their business, when she was fired from InterGang.) Though others claim her family considered her gang affiliation, especially after joining InterGang, to have brought shame to the clan, and rejected her. However, even they admit it's likely she reconciled with them at least as early as 913, perhaps because their formerly legitimate business suddenly brought shame to themselves, and because Lydia now had the ability to save their now-floundering business, using her position as a gang don.