Visa Publishes Whitepaper for Layer 2 Payment Channels for CBDC and Stablecoin Interoperability - LightBlocks Cryptocurrency and Blockchain News
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Visa Publishes Whitepaper for Layer 2 Payment Channels for CBDC and Stablecoin Interoperability

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Visa Publishes Whitepaper for Layer 2 Payment Channels for CBDC and Stablecoin Interoperability

Visa has published a whitepaper on Universal Payment Channels, a “hub-and-spoke” model for interoperability between different distributed ledger technologies.

According to published papers, financial services company Visa recommends that central bank digital currencies (CBDC) and stablecoins should be interoperable. The whitepaper “Universal Payment Channel” discussed an interoperability platform of digital currencies and the framework based on various distributed ledger technologies.

Visa’s UPC Solution 

The main goal of UPC is to overcome the scalability problems of existing networks. Visa proposes a “hub-and-spoke payment route” that works in a similar way to existing interoperability solutions. The working principle of UPC is to allow the sender to open a single payment channel with a hub, and the hub then manages transactions with different spokes.

The transaction is routed through intermediate nodes which eventually reaches the destination address. The paper states that this model leads to better network availability.

Visa also outlined several use cases for UPC, including CBDC’s cross-border payments and the digital currency market. For the former, it envisions a two-tier system in which different CBDCs have different ledgers that are connected via UPC centers. In terms of the market, UPC Hub will act as a bridge between regulated stablecoins.

The paper also leaves room for future considerations, such as concurrent transactions and data protection. The problem with the current form of UPC in processing transactions is that they must be processed serially, one transaction at a time. The aim is to enable maximum parallelization of transactions so that several payments can be made at the same time.

For data protection reasons, only UPC Hub can access all payment information and external parties can only see the final invoice amount. Visa intends to focus on privacy-protected off-chain payments.

Visa Going All In On Blockchain Technology

Visa believes that digital currency will be a part of everyday financial life in the future. The payment giant is also confident of bringing more CBDCs to market, although the US is still hesitant about it.

Visa’s UPC aims to connect all of these newly released CBDCs and stablecoins to a cross-chain platform for seamless transfer. The UPC hub will connect dedicated payment channels between blockchains, such as CBDC networks in different countries or verified private stablecoin networks.

There is no mention of the ability to transfer cryptocurrencies like Bitcoin or Ethereum, but the layout of the infrastructure likely allows it.

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