6 Questions for Alex O’Donnell about the future of DeFi

Uma­mi Labs CEO Alex O’Donnell grew up on the out­skirts of Philadel­phia before attend­ing Tem­ple Uni­ver­si­ty to study lit­er­a­ture and eco­nom­ics. That path led him to devote sev­en years of his life as a finan­cial jour­nal­ist at Reuters, where he spe­cial­ized in M&As IPOs.

He said his aca­d­e­m­ic focus cre­at­ed a “pret­ty nat­ur­al syn­the­sis” when it came ot finan­cial jour­nal­ism. How­ev­er, he said he became “dis­en­chant­ed” with his indus­try while he was cooped up 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 tin­ker­ing with cryp­tocur­ren­cy, which led to his intro­duc­tion with Uma­mi DAO — and ulti­mate­ly his cre­ation of Uma­mi Labs.

O’Donnell and his wife, San­jana, are prepar­ing for a “third, small­er per­son” to join their fam­i­ly next year. In the mean­time, he said he’s also gear­ing up for anoth­er cryp­to-relat­ed ven­ture. The details aren’t ful­ly pub­lic yet, but he said he plans to release more infor­ma­tion the months ahead.

1) How’d you make the transition from journalism to crypto?

I’d been a jour­nal­ist for the bet­ter part of a decade pri­mar­i­ly cov­er­ing merg­ers and acqui­si­tions. I always had an inter­est in finance and tech. But I start­ed becom­ing a bit dis­en­chant­ed with the main­stream media around the time of the pan­dem­ic. That was the first time I start­ed becom­ing a bit more cyn­i­cal about my own industry’s role in the infor­ma­tion econ­o­my. So I start­ed pay­ing more atten­tion to issues like pri­va­cy, cen­sor­ship and oth­er things I had not tak­en as much inter­est in before.

In 2020 I spent most of my time 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 wasn’t even that the offi­cial line was wrong. It was that dis­sent was being sti­fled in the first place. That real­ly peaked my inter­est in decen­tral­ized platforms.

At that point, I start­ed to become mean­ing­ful­ly inter­est­ed in cryp­to. Giv­en that I came from finan­cial jour­nal­ism, 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 the pre­de­ces­sor to Uma­mi — ZeroTwOhm.

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

I got involved in ZeroT­wOhm as a reg­u­lar retail investor aping in as many peo­ple did. It was a pret­ty small com­mu­ni­ty, so I was able to pret­ty quick­ly get in con­tact with the devel­op­ers build­ing the protocol. 

But they didn’t real­ly have a clear sense of direc­tion about what they want­ed to do next. They had boot­strapped sev­er­al mil­lions of dol­lars in cap­i­tal that was large­ly just sit­ting there. It felt like some­body need­ed to step in, and the devel­op­ers were, frankly, more than hap­py to hand respon­si­bil­i­ty off to some­one else, which end­ed up being me.

3) What are you focused on now?

What I’m most inter­est­ed in now is zero­ing in on a prob­lem that became very clear to me dur­ing my time at Uma­mi. Essen­tial­ly, as Uma­mi Labs geared up to launch our first prod­uct in ear­ly 2023, I was meet­ing with a lot of cryp­to-focused hedge funds and large indi­vid­ual investors. There was this gap­ing need for some way to secure­ly earn inter­est on USDC, USDT, and oth­er sta­ble­coins with­out hav­ing to just com­plete­ly move off-chain.

I already focused at Uma­mi on devel­op­ing anoth­er prod­uct that was designed to gen­er­ate returns on sta­ble­coins, but the real need is for some­thing that is as secure and bor­ing and reli­able as a con­ven­tion­al sav­ings account, but for peo­ple who were hold­ing sta­ble­coins on on-chain wal­lets. There have been for­ays into that area by oth­er play­ers, 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 for on- and off-ramp­ing on-chain.

That is some­thing I’m per­son­al­ly focused on now. I’m col­lab­o­rat­ing with some oth­ers on devel­op­ing some­thing, and get­ting feed­back from poten­tial ear­ly users. We’ll have more details to share with­in the next cou­ple of months. But for now, it’s still in the ear­ly stages.

4) What do you think will be the biggest crypto trends in 2024?

In my per­son­al opin­ion, I do think that the high point of the cryp­to mar­ket in 2021 real­ly was the high-water mar­ket of this era of very DIY, unreg­u­lat­ed, sort of com­mu­ni­ty-run boot­strapped pro­to­cols. I think that going in sub­se­quent years, includ­ing now, we’re going to see a pret­ty stark shift in which DeFi stops look­ing so much like a com­plete­ly sep­a­rate ecosys­tem. It will for all intents and pur­pos­es become a sub­set of TradFi.

Relat­ed: Coin­base launch­es reg­u­lat­ed cryp­to futures ser­vices for US retail traders

I don’t think the DeFi ver­sus Trad­Fi dis­tinc­tion is going to last. Obvi­ous­ly, we’re see­ing a num­ber of ETFs under­go­ing the reg­is­tra­tion process. In the back­ground, major play­ers are obtain­ing licens­es to engage in a wider array of finan­cial activ­i­ties in the U.S. Coin­base, for exam­ple has, reg­is­tered as a Futures Com­mis­sion Mer­chant and also as a Des­ig­nat­ed Con­tract Mar­ket with the CFTC. That autho­rizes them to oper­ate an exchange and open accounts with­in the futures mar­kets. Those will be focus, of course, 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 is very inter­est­ing. In par­al­lel to that, you have folks such as Fideli­ty and Franklin Tem­ple­ton and Black­Rock devel­op­ing reg­u­lat­ed cryp­to invest­ment prod­ucts. Franklin Tem­ple­ton is devel­op­ing its own tok­enized Trea­sury Bill ETF. It’s pret­ty clear that will be a source of momen­tum for the indus­try over the next sev­er­al years.

5) What’s the most interesting to you as an investment right now?

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

I’m pay­ing atten­tion to the stak­ing pro­to­cols like Lido and Eigen Lay­er. Eigen allows peo­ple to take ETH they’ve already staked and re-stake it to any num­ber of relat­ed stak­ing pro­to­cols. That very sig­nif­i­cant­ly expands the range of activ­i­ties that can be done trust­less­ly. I expect to see, over time, a lot of build­ing on top of Eigen and oth­er sim­i­lar pro­to­cols. I think we’ll see a pro­lif­er­a­tion of invest­ment funds and ETFs that spe­cial­ize in tak­ing ETH and stak­ing it and re-stak­ing it.

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

There needs to be a com­plete fusion of pro­to­cols on the bleed­ing edge of blockchain, and more estab­lished com­pa­nies that are inte­grat­ed into the tra­di­tion­al finan­cial sec­tor and capa­ble of oper­at­ing com­pli­ant­ly from a reg­u­la­to­ry per­spec­tive. We need to see estab­lished play­ers inte­grat­ing sophis­ti­cat­ed smart con­tracts and tak­ing full advan­tage of blockchain’s poten­tial. Then we’ll start to see blockchain becom­ing part of every­day finan­cial trans­ac­tions and activities.

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Coin­tele­graph Mag­a­zine writ­ers and reporters con­tributed to this article.