Deutsche Bank Is Building a Layer-2 Rollup Network on Ethereum With Matter Labs’ ZKsync Technology

The chain will be "a public and permissioned L2," Omar Azhar, the head of business development at Matter Labs, told CoinDesk over Telegram.

Banking giant Deutsche Bank is building out a layer-2 rollup network on Ethereum with Matter Labs’ ZKsync technology, Bloomberg reported Wednesday.

A representative for Matter Labs confirmed the story to CoinDesk. The chain will be "a public and permissioned L2," Omar Azhar, the head of business development at Matter Labs, told CoinDesk over Telegram.

When asked to elaborate, he referred a reporter to another participant in the project, Memento Blockchain, which did not immediately respond to a request for comment. Generally "public permissioned" means anyone can see what's happening on the network but only authorized participants can do certain things.

The project is a sign of a renewed interest in blockchain technology among institutions, as prices for various cryptocurrencies reach all-time highs. It also echoes the private enterprise blockchains that were in vogue nearly a decade ago.

Those systems were disconnected from public chains like Ethereum and Bitcoin, though they sometimes borrowed code from them.

The bank is creating the layer-2 network in order to address regulatory compliance issues that come with public blockchains in finance, according to the Bloomberg report. (Regulated institutions have to know who they are dealing with, which is hard in completely open networks like the main Ethereum chain).

The bank believes that by creating a layer-2 on top of Ethereum, it will improve the speed of transactions as well as address those compliance needs.

The ZKsync-based rollup could allow banks to experiment with blockchains, and let them select which validators could run said blockchain, Boon-Hiang Chan, Deutsche Bank’s Asia-Pacific industry applied innovation lead, told Bloomberg. The L2 blockchain may also give regulators “super admin rights,” allowing them to look more deeply into the movement of funds, Chan said.

The L2 endeavor was first announced by Memento Blockchain on Nov. 6, but it received little attention at the time. The chain is currently in a test network environment. It is built with ZK Stack, a customizable toolkit that lets developers build their own blockchains based on ZKsync's technology.

The L2 is part of Dama 2, a multi-chain initiative led by Deutsche Bank. Dama 2, in turn, is part of the Singapore Monetary Authority's Project Guardian, which is bringing together 24 major financial institutions that are looking into ways to use blockchains to tokenize their assets.