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Deutsche Bank It builds a layer 2 blockchain based on Ethereum To Solve Regulatory Hurdles Financial Institutions Face Using Public Blockchain, Bloomberg News I mentioned On December 17th.
The platform, dubbed Project Dama 2, represents the German banking giant’s attempt to harness the potential of blockchain technology while reducing the risks associated with public ledgers, which can often inadvertently deal with sanctioned entities or criminals.
The project, unveiled in November as a pilot, is designed to simplify asset servicing. It’s leverage ZKsync Zero-Knowledge Proof (ZKP) technology to offer cheaper and more efficient transactions.
Furthermore, the use of zkp will enable improved privacy and customization for institutional users developing Deutsche Bank’s blockchain. Cryptocurrency companies Memento Blockchain and Interop Labs are helping to develop the platform.
It is worth noting that the Dama 2 project is part of the Guardian project of the Monetary Authority of Singapore, which indicates the growing interest among traditional financial players in blockchain-based asset servicing and tokenization solutions.
JP Morgan It carried out its first transaction on the public blockchain in late 2022, also as part of Project Guardian, while Visa He is exploration Coding fiat currencies For traditional banks.
Meanwhile, traditional finance giants such as… Black Rock and Franklin Templeton It tokenized funds of funds with a combined market capitalization of more than $1 billion.
TradFi leverages blockchain technology
Public blockchains provide tremendous efficiency for regulated lenders. Ethereum is the infrastructure of choice among institutions, controlling 81% of real-world asset tokenization (RWA).
However, the report noted that these benefits come with uncertainty about who is validating transactions, the potential for transaction fees to reach sanctioned entities, and the risk of unexpected hard forks that could disrupt operations.
Deutsche Bank’s solution was to add a second layer blockchain to the mix. Boon Hyung Chan, Head of Applied Industry Innovation, Asia Pacific, Deutsche Bank, said:
“By using two chains, a number of these regulatory concerns should be met.”
As a result, the Dama 2 project connects to Ethereum while allowing the bank to avoid some of the alleged risks inherent in public blockchains. By creating a curated list of transaction validation tools and offering tools to give regulators exclusive “superior administrative rights,” the bank hopes to provide a more secure and compliant blockchain experience.
