Universal Payment Channels: An Interoperability Platform for Digital\n Currencies

Abstract

With the innovation of distributed ledger technology (DLT), often known as\nblockchain technology, there has been significant growth of digital tokens in\nthe form of cryptocurrencies, stablecoins, and central bank digital currencies.\nAs the number of DLT networks increases, each with varying design\ncharacteristics, the likelihood that transacting parties are on the same\nnetwork decreases. Thus, it is crucial to facilitate payments that are\nuniversal across networks, scalable to massive loads, and highly available. We\nenvision a future payment network that may be built on top of DLT networks\nwithout being subject to their limitations on interoperability, scalability,\nand availability faced by DLT payment solutions today. Specifically, we propose\na hub-and-spoke payment route, referred to here as Universal Payment Channels\n(UPC), that can be used to support digital token transfers of funds across\ndifferent networks through payment channels. We further discuss the potential\nuse cases of the UPC technology to support, and not complicate, an already\nrobust digital payment ecosystem. Finally, through the paper, we share some\nfuture directions of the UPC technology.\n