Home CryptocurrencyAltcoin Six questions for Alex O’Donnell about the future of DeFi

Six questions for Alex O’Donnell about the future of DeFi

by SuperiorInvest

Umami Labs CEO Alex O’Donnell grew up outside of Philadelphia before attending Temple University to study literature and economics. That path led him to dedicate seven years of his life as a financial journalist at Reuters, where he specialized in stock market mergers and acquisitions.

He said his academic approach created a “pretty natural synthesis” when it comes to financial journalism. However, he said he became “disenchanted” with his industry while stuck at home during the Covid-19 pandemic. “There really was a three-way alliance between journalists, government officials and technology companies trying to control the flow of information,” O’Donnell said in an interview with Cointelegraph.

He began playing with cryptocurrencies, which led to his introduction to Umami DAO and ultimately the creation of Umami Labs.

O’Donnell and his wife, Sanjana, are preparing for a “third smaller person” to join their family next year. Meanwhile, he said that he is also preparing for another cryptocurrency-related venture. The details are not yet fully public, but he said he plans to release more information in the coming months.

1) How did you transition from journalism to cryptocurrencies?

He had been a journalist for the better part of a decade primarily covering mergers and acquisitions. I always had an interest in finance and technology. But I started to become a little disenchanted with the mainstream media around the time of the pandemic. That was the first time I started to become a little more cynical about my own industry’s role in the information economy. Then I started paying more attention to topics like privacy, censorship, and other things that I hadn’t been as interested in before.

In 2020 I dedicated most of my time to covering the Covid-19 pandemic. There really was a three-way alliance between journalists, government officials and technology companies trying to control the flow of information. It’s not even that the official line was wrong. First, dissent was being repressed. That really sparked my interest in decentralized platforms.

At that time, I became significantly interested in cryptocurrencies. Since I come from a financial journalism background, decentralized finance (DeFi) in particular caught my interest. I really started actively investing in different crypto protocols as a retail investor in 2021. I was getting more involved in DeFi communities, and one of them was Umami’s predecessor: ZeroTwOhm.

2) How did that lead you to create Umami Labs?

I got involved in ZeroTwOh as a regular retail investor imitating how many people did. It was a fairly small community, so I was able to quickly get in touch with the developers who created the protocol.

But they didn’t really have a clear sense of direction about what they wanted to do next. They had raised several million dollars in capital that was largely there. It seemed like someone needed to step in and, frankly, the developers were more than happy to pass the responsibility on to someone else, which ended up being me.

3) What are you focused on now?

What interests me most now is to focus on a problem that became very clear to me during my stay at Umami. Basically, as Umami Labs was preparing to launch our first product in early 2023, I was meeting with many cryptocurrency-focused hedge funds and large individual investors. There was a huge need for some way to securely earn interest on USDC, USDT, and other stablecoins without having to go completely off-chain.

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I’ve already focused on Umami developing another product designed to generate returns on stablecoins, but the real need is something that is as safe, secure, and reliable as a conventional savings account, but for people who had stablecoins in wallets in chain. Other players have dabbled in that area, but I have yet to see a complete solution to that problem. It takes a combination of having the right regulated entities off-chain and seamless mechanisms to get on and off-chain.

That’s something I’m personally focused on right now. I’m collaborating with other people to develop something and getting feedback from potential early adopters. We will have more details to share in the coming months. But for now it’s still in the early stages.

In my personal opinion, I think the high point of the cryptocurrency market in 2021 was really the high water market of this era of very DIY, unregulated, community-managed bootstrapping protocols. I think that in the coming years, including now, we will see a fairly marked shift where DeFi will no longer resemble a completely separate ecosystem. For all intents and purposes, it will become a subset of TradFi.

Related: Coinbase Launches Regulated Crypto Futures Services for US Retail Traders

I don’t think the distinction between DeFi and TradFi will last. Obviously, we are seeing several ETFs in the process of registration. Under the hood, major players are obtaining licenses to engage in a broader range of financial activities on USCoinbase, e.g.registered as a Futures Commission Trader and also as a Designated Contract Market with the CFTC. This authorizes them to operate an exchange and open accounts in the futures markets. These will, of course, focus on Bitcoin and Ether.

Coinbase and Circle are accumulating different components that will allow them to become deeply integrated operators within traditional finance. I think that’s very interesting. In parallel to that, there are people like Fidelity, Franklin Templeton and BlackRock developingregulatedcryptoinvestmentproducts. Franklin Templeton is developing its own tokenized Treasury Bill ETF. It is quite clear that this will be a source of momentum for the industry for years to come.

5) What is the most interesting for you as an investment right now?

Really, the only thing that interests me in cryptocurrencies as a long-term investment is Ether and its staking and re-staking derivatives. I think we are still at a point where the vast majority of potential cryptocurrency investments are extremely speculative. The underlying value proposition of the tokens is still unclear. I think ETH is one of the few exceptions. So I have ETH and I’m comfortable with it as a long-term investment.

I am paying attention to betting protocols like Lido and Eigen Layer. Eigen allows people to take ETH they have already staked and stake it again in any amount of differentrelatedbetting protocols. This very significantly expands the range of activities that can be performed without trust. I expect to see, over time, a lot of building on Eigen and other similar protocols. I think we will see a proliferation of mutual funds and ETFs that specialize in taking ETH, staking it, and staking it again.

6) What do you think is the main obstacle to the mass adoption of blockchain technology?

There needs to be a complete merger of protocols at the forefront of blockchain and more established companies that are integrated into the traditional financial sector and are able to operate compliantly from a regulatory perspective. We need to see established players integrating sophisticated smart contracts and making the most of the potential of blockchain. We will then begin to see blockchain become part of everyday financial transactions and activities.

The editorial staff

Cointelegraph magazine writers and reporters contributed to this article.

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