Source: Blockchain Knight

According to a report by Bloomberg News on December 17, Deutsche Bank is building an L2 blockchain based on Ethereum to solve the problem of financial institutions using public blocks. Regulatory obstacles faced by the chain.

The platform, called Project Dama2, represents the German banking giant’s attempt to harness the potential of blockchain technology while minimizing the risks associated with public ledgers, which tend to Unintentionally transacting with sanctioned entities or criminals.

The project was launched in November as a pilot project to simplify asset servicing.

Project Dama2 leverages ZKsync’s zero-knowledge proof (zkp) technology to provide cheaper and more efficient transactions.

In addition, using zkp can also provide higher privacy and customized services for institutional users developed on Deutsche Bank's proprietary blockchain. Crypto asset firm Memento Blockchain and Interop Labs are assisting in the development of the platform.

It is worth noting that Project Dama2 is part of the Monetary Authority of Singapore’s Guardian project, which demonstrates the growing interest of traditional financial players in blockchain-based asset services and tokenization solutions.

JPMorgan Chase executed the first transaction on a public blockchain in late 2022 as part of the Guardian project.

At the same time, traditional financial giants such as BlackRock and Franklin Templeton have tokenized currency funds, with a total market value exceeding US$1 billion.

Public blockchain offers huge efficiencies to regulated lenders.

In addition, Ethereum is also an infrastructure favored by institutions, accounting for 81% of the tokenization of real-world assets (RWA).

However, the report notes that these advantages come with uncertainty about transaction validators, transaction fees potentially reaching sanctioned entities, and the risk of unforeseen blockchain hard forks that could disrupt business.

The solution Deutsche Bank found was to add its own L2 blockchain to the mix.

Boon-HiongChan, head of industry application innovation in Asia Pacific at Deutsche Bank, said: “Using L2 should be able to solve part of the regulatory issues.”

Therefore, Project Dama2 will connect to Ethereum while , also allows banks to avoid some of the alleged risks inherent in public blockchains.

Deutsche Bank hopes to provide safer and more compliant blocks by creating a curated list of transaction validators and providing tools to give regulators exclusive "super administrative rights" chain experience.