Source: cryptoslate
Compiled by: Blockchain Knight
According to Bloomberg News on December 17, Deutsche Bank is building an Ethereum-based L2 blockchain to address the regulatory hurdles faced by financial institutions when using public blockchains.
The platform is known as Project Dama2, representing this German banking giant's attempt to harness the potential of blockchain technology while minimizing the risks associated with public ledgers, as public ledgers often inadvertently transact with sanctioned entities or criminals.
The project was launched in November as a pilot project aimed at simplifying asset services.
Project Dama2 utilizes ZKsync's zero-knowledge proof (zkp) technology to provide cheaper and more efficient transactions.
Moreover, using zkp can provide higher privacy and customized services for institutional users developed on Deutsche Bank's proprietary blockchain. Crypto asset companies Memento Blockchain and Interop Labs are assisting in the platform's development.
It is worth noting that Project Dama2 is part of the Monetary Authority of Singapore's Guardian project, indicating a growing interest among traditional financial players in blockchain-based asset services and tokenization solutions.
JPMorgan executed its first transaction on a public blockchain at the end of 2022, which is also part of the Guardian project.
Meanwhile, traditional financial giants such as BlackRock and Franklin Templeton have tokenized money market funds with a total market value exceeding $1 billion.
Public blockchains provide tremendous efficiency for regulated lending institutions.
Additionally, Ethereum is also a preferred infrastructure among institutions, accounting for 81% in the tokenization of real-world assets (RWA).
However, the report points out that these advantages come with uncertainties for transaction validators, the possibility of transaction fees reaching sanctioned entities, and the unforeseen risk of disruptive blockchain hard forks.
The solution found by Deutsche Bank is to incorporate its own L2 blockchain.
Boon-Hiong Chan, Head of Industry Applications Innovation for Deutsche Bank in the Asia-Pacific region, stated, 'Using L2 should be able to address some of the regulatory issues.'
Therefore, Project Dama2 allows banks to circumvent some of the so-called risks inherent in public blockchains while connecting to Ethereum.
Deutsche Bank aims to offer a safer and more compliant blockchain experience by creating a carefully curated list of transaction validators and providing various tools to grant regulators exclusive 'super management permissions.'
