Bloomberg News reports that Deutsche Bank will build a layer-2 public blockchain on Ethereum in order to overcome the regulatory challenges financial institutions encounter when using public blockchains. reported 17th December
The platform, dubbed Project Dama 2, represents the German banking giant’s attempt to harness blockchain technology’s potential while minimizing risks associated with public ledgers, which can often inadvertently transact with sanctioned entities or criminals.
Project, which was unveiled as a trial in November is aimed at streamlining asset service. It leverages ZKsync’s zero-knowledge proof (zkp) technology to offer cheaper and more efficient transactions.
Moreover, using zkp will enable enhanced privacy and customization for institutional users developing on Deutsche Bank’s proprietary blockchain. Crypto firms Memento Blockchain and Interop Labs are aiding the platform’s development.
Notably, Project Dama 2 is part of the Monetary Authority of Singapore’s Project Guardian, which signals a growing interest among traditional financial players in blockchain-based asset servicing and tokenization solutions.
JPMorgan completed its first public blockchain transaction in 2022 as well, within Project Guardian. Visa will be implementing the same technology by then. Explore the tokenization and fiat currency Traditional banks are not the only option.
Tokenized money funds have been launched by traditional finance titans, such as BlackRock or Franklin Templeton. Their combined market value is over $1 billion.
TradFi leverages blockchain
Public blockchains are a great tool for lenders who must adhere to strict regulations. Ethereum is the most popular infrastructure among institutions. It dominates 81% in the tokenization real-world assets.
The report did point out, however, that while these benefits are great, they come at a cost. These include uncertainty about who will validate transactions, whether transaction fees can reach sanctioned parties, and the potential for unforeseen hard forks in the blockchain that may disrupt operations.
Deutsche Bank found a solution by adding layer-2 to its blockchain. Boon-Hiong Chan, Deutsche Bank’s Asia-Pacific industry applied innovation lead, stated:
“Using two chains, a number of these regulatory concerns should be able to be satisfied.”
Project Dama 2 allows the bank to avoid some of the risks associated with public blockchains. In order to offer regulators exclusive access, the list will be curated and include transaction validators. “super admin rights,”The bank hopes that it can provide customers with a blockchain experience which is more compliant and secure.
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