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Once the largest bank in Europe, Deutsche Bank has launched a toned-down version of Ethereum Layer 2 based on ZkSync to meet regulatory requirements.
Bloomberg reported that Deutsche Bank AG has launched the Ethereum Layer 2 'Project Dama 2' based on zkSync. Although it is still in the testing phase, this marks a major advancement in TradFi integrating blockchain. It also pointed out that verification mechanisms like Decentralization are actually a major issue in terms of regulation. The pilot program is expected to release the Minimum Viable Product (MVP) next year.
Deutsche Bank launches a castrated version of L2, positioning is questionable
Deutsche Bank is collaborating with the crypto companies Memento Blockchain Pte. and Interop Labs to develop 'Project Dama 2', which is based on zkSync, a Layer 2 for Ethereum. Why do bank settlements need blockchain, even Layer 2?
This is because public chains like Ethereum are seen as risky for regulated lending institutions, including the inability to determine 'who is verifying transactions', the possibility of transaction fees being paid to sanctioned entities, and the threat of unexpected hard forks resulting in a complete change of the digital ledger. Layer 2 can solve this problem.
Boon-Hiong Chan, Head of Industry Application Innovation in Asia-Pacific at Deutsche Bank, pointed out that Layer 2 can allow banks to experiment more freely on public chains and allow them to "establish a list of confirmed validators" who earn rewards by processing transactions. Other potential benefits include providing regulatory authorities with management authority to review fund flows when necessary.
Yes, in other words, Project Dama 2 is not quite like our understanding of Layer 2. It completely abandons Decentralization (only validators approved by the core). It provides regulatory authorities with management permissions (not sure how much data will be provided specifically). And these are the embryonic form of fully regulated blockchain, it seems that only technology is left, without much blockchain spirit.
The Monetary Authority of Singapore links 24 financial institutions to try tokenizing assets
In fact, Project Dama 2 is part of the Monetary Authority of Singapore's (MAS) 'Project Guardian'. The project aims to study how 24 major financial institutions can tokenize assets using blockchain technology. Supporters, including Deutsche Bank, believe that blockchain technology provides an opportunity to address the profit compression in the financial services industry. However, there are also concerns about the extent to which banks should intervene in the crypto ecosystem.
It is not yet confirmed whether Project Dama 2 under 'Project Guardian' is a public chain or a private/consortium chain. In Taiwan, financial and life insurance institutions often use the latter two to achieve blockchain settlement. The report also mentioned that the keyword is to allow 24 financial institutions to pilot asset tokenization. The maximum settlement is theoretically permissionless and available to all users. However, it is also in stark contrast to the current known regulatory requirements.
This article was originally published on ChainNews ABMedia, stating that Europe's largest bank, Deutsche Bank, has launched a castrated version of Ethereum Layer 2 based on zkSync to meet regulatory requirements.