Deutsche Bank wants to build a ‘so-called’ Layer 2 on the Ethereum network: report

Deutsche Financial institution is reportedly constructing a Layer 2 beneath a pilot asset administration venture referred to as Dama 2, as a part of the lender’s objective to take away regulatory hurdles for establishments wanting to make use of public blockchains.

Based on a Bloomberg report revealed on December 18, German banking large Deutsche Financial institution AG is constructing a “so-called” Layer 2 for a public community. The lender hopes the venture will eradicate regulatory challenges confronted by monetary corporations attempting to combine public blockchains into their operations.

Final month, Deutsche Financial institution launched a check model of Undertaking Dama 2, which features a Layer 2 constructed on the Ethereum (ETH) community, the second largest cryptocurrency community by market capitalization after Bitcoin (BTC).

Boon-Hiong Chan, Deutsche Financial institution’s utilized innovation chief in Asia Pacific, stated public blockchains similar to Ethereum pose a threat to monetary establishments getting into the blockchain as corporations fear about interacting with criminals or sanctioned entities inside the ecosystem.

It’s because, in keeping with Chan, establishments have no idea “who precisely validates the transactions” and whether or not transaction charges may find yourself within the pockets of sanctioned entities. There’s additionally the looming menace of a ‘arduous fork’ within the ecosystem that might revolutionize the digital ledger.

“Utilizing two chains ought to handle a few of these regulatory issues,” Chan informed Bloomberg, including that the financial institution continues to be awaiting regulatory approval however hopes to launch the product subsequent years to market as minimally viable.

Chan believes the built-in Layer 2 may pave the way in which for banks to discover new capabilities inside public blockchains, permitting them to construct a “extra personalized checklist of validators” that can course of digital asset transactions to earn rewards.

Moreover, he said that regulators might be given “tremendous admin rights” that may enable them to watch the circulate of funds inside the blockchain to detect unlawful transactions.

“You might be not depending on Layer 1 for detailed transaction information,” says Chan.

Undertaking Dama 2 is a part of a good bigger initiative by the Financial Authority of Singapore referred to as Undertaking Guardian. Undertaking Guardian brings collectively 24 main monetary corporations exploring methods to make use of the blockchain to tokenize property. Nonetheless, the venture has raised questions on how deep banks are keen to enterprise in terms of the crypto sphere.

The Dama 2 specifically was born from collaborations with crypto corporations Memento Blockchain and Interop Labs. The platform is constructed utilizing ZKsync expertise.

Again in Could 2024, Deutsche Financial institution introduced that it was testing an unnamed Ethereum-based platform. The financial institution stated the platform would supply companies round tokenized funds.

Deutsche Financial institution joined Undertaking Guardian on Could 14, aiming to check the feasibility of asset tokenization together with different main banking companies similar to JPMorgan Chase & Co., DBS Group and Ant Worldwide, amongst others.