Universal Payment Channels: An Interoperability Platform for Digital Currencies

TL;DR

This paper proposes Universal Payment Channels (UPC), a scalable and interoperable hub-and-spoke payment system designed to enable cross-network digital currency transfers without the limitations of current DLT solutions.

Contribution

It introduces the UPC framework, a novel interoperability platform that supports scalable, cross-network digital payments through a hub-and-spoke architecture.

Findings

Supports cross-network digital token transfers

Enhances scalability and availability of digital payments

Proposes future directions for UPC technology

Abstract

With the innovation of distributed ledger technology (DLT), often known as blockchain technology, there has been significant growth of digital tokens in the form of cryptocurrencies, stablecoins, and central bank digital currencies. As the number of DLT networks increases, each with varying design characteristics, the likelihood that transacting parties are on the same network decreases. Thus, it is crucial to facilitate payments that are universal across networks, scalable to massive loads, and highly available. We envision a future payment network that may be built on top of DLT networks without being subject to their limitations on interoperability, scalability, and availability faced by DLT payment solutions today. Specifically, we propose a hub-and-spoke payment route, referred to here as Universal Payment Channels (UPC), that can be used to support digital token transfers of funds across different networks through payment channels. We further discuss the potential use cases of the UPC technology to support, and not complicate, an already robust digital payment ecosystem. Finally, through the paper, we share some future directions of the UPC technology.