Bloomberg reported that Deutsche Bank AG launched Ethereum Layer 2 'Project Dama 2' based on zkSync. Although it is still in a testing phase, this marks a significant advancement in the integration of traditional finance with blockchain. It also highlights that decentralized verification mechanisms can pose significant challenges during regulation. The pilot program is expected to launch a Minimum Viable Product (MVP) next year.
Deutsche Bank promotes a stripped-down version of L2, raising doubts about its positioning.
Deutsche Bank collaborates with crypto firms Memento Blockchain Pte. and Interop Labs to develop 'Project Dama 2,' which is an Ethereum Layer 2 based on zkSync. Why do bank settlements need blockchain, even Layer 2?
This is because, for banks, public chains like Ethereum are fraught with risks for regulated lending institutions, including uncertainty about 'who is validating transactions,' whether transaction fees might be paid to sanctioned entities, and the threat of unexpected hard forks that could fundamentally alter the digital ledger. Layer 2 can address these issues.
Boon-Hiong Chan, Head of Industry Application Innovation for Deutsche Bank in the Asia-Pacific region, pointed out that Layer 2 allows banks to experiment more freely on public chains and enables them to 'establish a confirmed list of validators' who are rewarded for processing transactions. Other potential benefits include providing management authority to regulators for reviewing fund flows when necessary.
Yes, in other words, Project Dama 2 does not resemble the Layer 2 we understand. It completely abandons decentralization (validators can only serve with approval). It provides management authority to regulators (specific details on the data provided are unknown). These elements represent a prototype of a highly regulated blockchain, seemingly retaining only the technology without much of the blockchain spirit.
The Monetary Authority of Singapore connects 24 financial institutions to attempt asset tokenization.
In fact, Project Dama 2 is part of the Monetary Authority of Singapore (MAS) 'Project Guardian.' This initiative aims to study how 24 major financial institutions can utilize blockchain technology to tokenize assets. Supporters, including Deutsche Bank, believe blockchain technology offers opportunities to address the profit compression in the financial services industry. However, there are also concerns about how deeply banks should intervene in the crypto ecosystem.
Currently, it has not been confirmed whether Project Dama 2 under 'Project Guardian' is a public chain or a private/consortium chain. In Taiwan, financial and insurance institutions mainly use the latter two for blockchain settlements. Reports also mention that the key point is to allow 24 financial institutions to pilot asset tokenization. The main advantage of a public chain is that it theoretically requires no permission, making it available to all users. However, this is quite different from the known regulatory requirements.
This article was once the largest bank in Europe, Deutsche Bank launched a stripped-down version of Ethereum Layer 2 based on zkSync to meet regulatory requirements, first appeared in Chain News ABMedia.
