Universal Payment Channels: An Interoperability Platform for Digital Currencies
This addresses the challenge of cross-network payments for users and systems in the growing digital currency ecosystem, though it appears incremental as it builds on existing payment channel concepts.
The paper tackles the problem of enabling payments across different distributed ledger technology (DLT) networks by proposing Universal Payment Channels (UPC), a hub-and-spoke payment route that facilitates digital token transfers without being limited by interoperability, scalability, and availability issues.
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.