German banking giant builds ETH L2 to simplify asset services

The project was launched as a pilot project in November to simplify asset services.

Source: cryptoslate

Compiled by Blockchain Knight

According to Bloomberg on December 17th, Deutsche Bank is building an Ethereum-based L2 blockchain to address regulatory barriers faced by financial institutions when using public blockchains.

The platform is called Project Dama2, representing the German banking giant’s attempt to harness the potential of blockchain technology while minimizing the risks associated with public ledgers because public ledgers often inadvertently involve transactions with sanctioned entities or criminals.

The project was launched as a pilot project in November, aiming to simplify asset services.

Project Dama2 uses ZKsync’s zero-knowledge proof (zkp) technology to provide cheaper and more efficient transactions.

In addition, using zkp can also provide higher privacy and customized services for institutional users developed on Deutsche Bank’s proprietary blockchain. Crypto asset company Memento Blockchain and Interop Labs are assisting in the development of the platform.

It’s 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 Chase executed the first transaction on a public blockchain by the end of 2022, which is also part of the Guardian project.

At the same time, traditional financial giants such as BlackRock and Franklin Templeton have securitized money market funds, with a total market value exceeding 10 billion U.S. dollars.

Public blockchain has provided significant efficiency for regulated lending institutions.

In addition, Ethereum is also favored by institutions as infrastructure, 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 unpredictable risk of blockchain hard forks that may interrupt business operations.

The solution found by Deutsche Bank is to incorporate its own L2 blockchain into it.

Boon-HiongChan, Head of Industry Application Innovation for Deutsche Bank Asia Pacific, said: “Using L2 should be able to solve some regulatory issues.”

Therefore, Project Dama2 allows banks to avoid some of the so-called risks inherent in public blockchains while connecting to Ethereum.

Deutsche Bank hopes to provide a more secure and compliant blockchain experience by creating a carefully planned list of transaction validators and providing various tools to empower regulators with exclusive ‘super admin rights’.