Deutsche Bank's Entry into Ethereum Layer 2 Expansion Interpretation

In August this year, Japanese electronics giant Sony officially announced the launch of its Ethereum Layer 2 expansion, Soneium.

Four months later, German banking giant Deutsche Bank also officially announced the launch of its own Ethereum Layer 2 expansion.

For a detailed introduction to this news, you can refer to the article by PANews linked at the end.

This news was announced by the Head of Application Innovation for Deutsche Bank in the Asia-Pacific region, with the project named Project Dama 2. Its beta version was launched as early as November, and the official version is expected to be released next year after regulatory approval.

The Layer 2 expansion launched by Deutsche Bank is built on the zkSync Stack architecture, and there are two main features that I find particularly interesting:

One is that it uses Soulbound Tokens to establish digital identity.

The other is that it uses a Paymaster to allow users to pay network fees.

Soulbound Tokens were a relatively popular technology a year or two ago.

I remember when this technology was first introduced, the projects and users in the ecosystem primarily viewed it as a way to issue various honorary tokens, such as for participating in events or receiving rewards.

At that time, people's imagination about it was quite narrow, so the hype didn't last long, and few people mentioned it again, let alone launched any large-scale applications based on this technology.

Now, this project uses it to establish users' digital identities, which feels quite similar to representing traditional bank personal user information with Soulbound Tokens.

This perspective is significantly different from before. Although this is purely a centralized application, it has allowed this technology to serve a purpose that was previously unimagined.

So sometimes, the application of technology can really exceed our imagination—it's possible that the A scenario we long for doesn't materialize for a long time, but an unexpected B scenario does.

Paymaster is a tool that I really like. I happened to mention this application in a recent article. Its biggest feature is that it allows users to choose other tokens (non-mainnet tokens) to pay transaction fees.

The scenario where I use this tool most frequently is in the zkSync Layer 2 expansion. In these Layer 2 expansions, when I swap various tokens on a DEX and need to pay fees, I usually don't choose ETH but rather some smaller tokens.

This tool provides great convenience for users while also empowering the tokens.

One can imagine that if this tool is used in Deutsche Bank's Layer 2 expansion, users could completely pay transaction fees using various stablecoins supported by Deutsche Bank, without needing to use Ethereum.

For ordinary users, they might not even feel the existence of Ethereum or even blockchain. What they see are just various stablecoins on-chain: such as US dollar stablecoins, euro stablecoins, and so on.

Compared to Sony's use of OP Stack technology to build its own Layer 2 expansion, Deutsche Bank chose zkSync. I think the main reason here is likely due to security considerations.

Layer 2 expansions based on zkSync technology do not require a 7-day waiting period, and each transaction can be confirmed in real-time, which is much better in terms of security, but still lacks efficiency. It sacrifices efficiency for a security-first approach.

I recall a reader commenting at the end of a recent article, asking whether it is worth holding Starknet tokens now.

Initially, I was optimistic about zkSync being far greater than OP. However, the development of the two ecosystems has shown a clear divergence, with zkSync lagging behind OP, leading me to doubt whether zkSync would have a chance to catch up in the future.

Looking at it now, if the financial industry, especially financial sectors like banks, follow Deutsche Bank's lead in entering Ethereum's Layer 2 expansion, they will likely choose zkSync based on security considerations. If this trend continues, zkSync still has significant opportunities, though it may take some time.

I still hold all tokens related to zkSync Layer 2 expansions and have not sold any.

I look forward to the resurgence of zkSync technology.