Deutsche Bank Is Launching A Layer 2 On Ethereum

Although Ethereum is regularly challenged by rival blockchains, it maintains its prime position among major financial institutions. Indeed, many have already adopted it as an alternative solution for their transactions. Now, it is Deutsche Bank’s turn to take the plunge. The German bank is working on an ambitious project aimed at integrating a second-layer blockchain on Ethereum, as part of its regulatory compliance initiative.

Ethereum, at the heart of banking innovation

Deutsche Bank is not one to be easily impressed by the new blockchains that are proliferating in the market. Its project, dubbed Dama 2, utilizes ZKsync technology, a protocol that allows for optimizing transactions on Ethereum while reducing their costs and slowness.

The objective is straightforward: to meet compliance requirements while continuing to leverage the benefits of public blockchain.

Through this Layer 2 (L2), the bank intends to provide a secure framework for financial institutions wishing to approach decentralization without taking risks.

This initiative is part of Project Guardian, an initiative by the Monetary Authority of Singapore, aimed at exploring the possibilities of asset tokenization via blockchain. This partnership brings together 24 financial institutions to test and integrate innovative solutions.

If Deutsche Bank succeeds in its bet, it could become a model to follow for other finance giants, showing that it is possible to combine decentralization and strict regulation.

Crypto: Deutsche Bank paves the way for new possibilities

The advantages of a Layer 2 on Ethereum are numerous: faster transactions, lower costs, and better compliance with financial rules. The Dama 2 project allows for the addition of advanced regulatory tools, such as “super” administrator rights for regulators, to monitor and audit transactions transparently.

This platform could be key for large financial institutions to further adopt blockchain while protecting themselves from associated risks, such as transactions with sanctioned entities.

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The stakes are high, as public blockchains are often seen as too vulnerable to abuse. By partnering with ZKsync, Deutsche Bank hopes to provide a secure environment where institutions can trade crypto-assets without fearing violations of existing regulations.

But as a bank official points out, “the balance between innovation and compliance is delicate, but this is what we are betting on“.

• Layer 2 for more efficient transactions;
• ZKsync for security and compliance;
• Platform testing under Project Guardian;
• Objective: a functional version in 2025.

Deutsche Bank’s project is not a first in the sector. The bank already launched in June 2023 with a crypto plan including digital asset custody services, shaking up the German financial landscape. A bold bet that could change the game.