Bull markets is the season of mainnet launch, airdrops and exciting announcements.
After the world’s shortest testnet, Kraken brought forward yesterday the mainnet launch of its Ink L2 rollup — months ahead of schedule. Sophon launched the mainnet of its validium L2 based on Avail’s data availability layer.
What’s the big news that has ETH bulls so excited? Bloomberg reports that the banking giant Deutsche Bank plans to deploy ZKsync Elastic Chain’s L2 stack.
“Institutions looking to build onchain are coming to ZKsync for the ability to build in Web3 without compromise. ZKsync offers institutions with a customizable architecture to build tailored solutions that enable privacy, scalability and interoperability with other private and public blockchains,” Blockworks spoke to Alex Gluchowski.
Project DAMA 2 is the codename for Deutsche Bank’s initiative, which was originally announced as a part of Project Guardian by Singapore’s central bank in early November. Project Guardian, a global consortium consisting of 28 financial institutions and 8 key policymaker organizations, aims to encourage financial institutions to experiment with asset tokenization.
Deutsche’s L2 was developed by TradFi. All the TradFi L2 features are to be expected.
This means that it is a L2 network with permissions, and as such must prioritise regulatory compliance above the financial degeneracy found on many public blockchains.
Even the most progressive policymakers don’t want to give up all their powers in an emergency.
Simply put, the financial regulators want you to innovate using blockchains but please do not go so far as to undermine our political bottom line.
As AdrianoFeria.eth put it: “The only pragmatic choices for institutions that require stringent oversight and interoperability are to either run their own private, permissioned layer-1 chains, or to harness Ethereum’s L2 ecosystems.”
In order to find a solution that is customizable, Deutsche Bank, along with many other central institutions, turned towards Ethereum.
Ethereum’s shift from sharding in 2020 to a roadmap centered on rollups was pitched primarily as a bet that the technology would allow for horizontal scaling, rather than Solana’s vertical scaling approach. It’s like saying that the world state is too big to fit on one block chain, so we have to break it into smaller blocks.
This modular freedom of launching a chain how you like is what also motivates TradFi institutions.
Naturally, this strategy is not unique to Ethereum. Avalanche, too has aggressively pursued the subnet model.
Avalanche has not been able to match the adoption of Ethereum’s rollup because it is a step behind in terms of technology.
“Firstly, Ethereum rollups came out before Avalanche’s subnets. And when subnets were ready, it carried a far higher upfront cost compared to launching an OP Stack rollup. All the while, costs of rollups were trending down with EIP-4844 and new data availability solutions like Celestia,” Blockworks Research analyst Nikhil Chaturvedi explained.
Avalanche’s image is changing too.
Avalanche upgraded Etna this week, reducing the cost of creating an Avalanche Subnet (now called Avalanche L1s). P-Chain Validators used to have staked 2000 AVAX. Today, the costs are 10x lower.
“The costs are now reduced to be cheaper or comparable to the cost of a rollup on Celestia,” Chaturvedi said.
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