Source: cryptoslate
Compiled by: Blockchain Knight
According to a Bloomberg report 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, known as Project Dama2, represents this German banking giant's attempt to harness the potential of blockchain technology while minimizing 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, aiming to simplify asset services.
Project Dama2 utilizes ZKsync's zero-knowledge proof (zkp) technology to provide cheaper and more efficient transactions.
In addition, 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.
Notably, Project Dama2 is part of the Monetary Authority of Singapore's Guardian project, indicating that traditional financial players are increasingly interested 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 like BlackRock and Franklin Templeton have tokenized money market funds, with a total market cap exceeding $1 billion.
Public blockchains offer significant efficiency for regulated lending institutions.
Moreover, Ethereum is also a favored infrastructure for institutions, accounting for 81% of the tokenization of real-world assets (RWA).
However, the report points out that these advantages come with uncertainties for transaction validators, transaction fees that may reach sanctioned entities, and the unforeseen risk of business disruptions due to blockchain hard forks.
Deutsche Bank's solution is to incorporate its own L2 blockchain.
Boon-Hiong Chan, Head of Industry Application 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 provide a safer and more compliant blockchain experience by creating a carefully curated list of transaction validators and offering various tools to grant regulators exclusive 'super management privileges.'
