Deutsche Bank Developing Layer-2 Blockchain on Ethereum
Deutsche Bank is taking steps to address regulatory hurdles faced by financial institutions using public blockchains by building a layer-2 blockchain based on Ethereum, as reported by Bloomberg News on Dec. 17.
Project Dama 2 Overview
- The platform, known as Project Dama 2, aims to leverage blockchain technology’s potential while mitigating risks associated with public ledgers.
- Unveiled in November as a pilot, Project Dama 2 focuses on streamlining asset servicing and utilizes ZKsync’s zero-knowledge proof (zkp) technology for more cost-effective and efficient transactions.
- Partnerships with Crypto firms Memento Blockchain and Interop Labs are aiding in the development of the platform.
Traditional Financial Players Embracing Blockchain
Project Dama 2 is part of the Monetary Authority of Singapore’s Project Guardian, indicating increasing interest from traditional financial institutions in blockchain-based asset servicing and tokenization solutions.
JPMorgan and Visa have also shown initiatives in blockchain technology, with JPMorgan executing its first transaction on a public blockchain in late 2022 and Visa exploring fiat currency tokenization for traditional banks.
Moreover, companies like BlackRock and Franklin Templeton have already tokenized money funds with a combined market cap exceeding $1 billion.
TradFi Adoption of Blockchain
Public blockchains offer efficiency for regulated lenders, with Ethereum being the preferred infrastructure due to its dominance in the tokenization of real-world assets (RWA).
However, concerns over transaction validation, transaction fees reaching sanctioned entities, and potential blockchain disruptions exist. To address these issues, Deutsche Bank has introduced its layer-2 blockchain solution.
Boon-Hiong Chan, Deutsche Bank’s Asia-Pacific industry applied innovation lead, commented: “Using two chains, a number of these regulatory concerns should be able to be satisfied.”
Project Dama 2 connects to Ethereum while offering enhanced security and compliance through a curated list of transaction validators and exclusive regulatory access.
