October instilled a notion of optimism within the crypto space. From Bitcoin’s foray into $35,000, the global crypto market entering the greed zone to signs of recovery in non-fungible tokens (NFTs) and decentralized finance (DeFi), it went through a rollercoaster ride of hype and skepticism. There’s a growing curiosity in the community about what’s next. What else is on the horizon for the upcoming bull run? Will there be a catalyst to trigger the mainstream adoption of cryptocurrencies and NFTs?
TheNewsCrypto engaged in an exclusive conversation with Josh Fraser, co-founder of Origin Protocol, who shared his insights on the origin and the current status of the NFT frenzy and the evolving trends in DeFi. He also spotlights the progress of Origin Story, which enables creators and businesses to establish their own NFT marketplaces, and Origin DeFi, which is leading the way in yield-generation and liquid staking finance (LSTFi).
From reading through the 15-year-old Bitcoin whitepaper to becoming a tech-savvy crypto veteran, Josh Fraser conveys his opinions on the “peaceful revolution” initiated by this groundbreaking technology.
TheNewsCrypto: NFTs observed an explosion of hype in 2021 and came crashing to a critical bottom in 2023. How do you view the need and potential recovery of NFTs?
Josh Fraser (JF): For example, in the real estate industry, you have to go through dusty papers to ensure there’s no lien against a property. There’s all this paperwork you have to go through, and there’s no digital record of property ownership or any potential liens against it. So, all of this should be digitized.
We need a single, trustless database where we can easily determine who owns what. NFTs are a great tool that we can utilize for tasks like these. So, NFTs will make a return, whether we call them NFTs or not, remains to be seen. However, digital ownership is a no-brainer, and we will see more of it, not less.
TheNewsCrypto: With a creator-centric approach, Origin Story, your NFT-dedicated subsidiary, collaborated with some renowned artists like 3LAU, and Paris Hilton, and led the viral video’s –”Charlie Bit My Fingers” – $760K auction. Did this help in driving mainstream adoption and is the NFT frenzy still attracting artists with the same level of momentum?
JF: It was incentives that largely drove this. Many people jumped in because they saw a chance to make money and be a part of this new technology and trend, often without a complete understanding.
They wanted to experiment with it and be early adopters to learn. The best way to learn is by jumping in and experimenting. There was a lot of experimentation, with many people trying to understand its implications and potential uses. There were numerous permutations of ideas, asking, “What if we use it like this or that?”
Sometimes experiments work, while at other times, they don’t – that’s fine. We should encourage this level of experimentation. Today, we’ve seen that a lot of the hype has died down, and it’s much quieter with fewer conversations about NFTs. It’s possible that people might have been carried away in the hype and mania, but this doesn’t rule out the comeback of NFTs in a more practical and useful format.
TheNewsCrypto: You ventured into creating NFT marketplaces like Origin Story for creators and businesses, such as Pudgy Penguins and RoofStock, despite the existence of platforms like OpenSea, Rarible, MagicEden, and Blur. Why do projects require their own marketplace?
JF: Origin Story revolves around providing individual collections with their own space to feature their products. Consider the difference between Amazon and Shopify, or, for instance, a luxury brand like Louis Vuitton, which doesn’t sell its bags on Amazon. Instead, they maintain a custom website where they exclusively feature and sell their bags, alongside their other products.
The concept is that creators of these NFTs won’t want to get lost in the vast sea of unrelated items (pun intended). They desire a distinct home where they can have control over the user experience. This is the core idea behind Origin Story, where we create white-label experiences allowing people to buy and sell NFTs while also building a unique home for the diverse elements they wish to build around their own collections.
TheNewsCrypto: Origin has pioneered the concept of yield-generating stablecoins, by introducing Origin Dollar (OUSD). What sets it apart from regular stablecoins?
JF: One factor that sets them apart is their revenue-generating capability. When you hold stablecoins in your wallet, you aren’t earning any money at all. The Fed directly, or indirectly, is devaluing your currency through measures like quantitative easing. Therefore, it’s not advisable to sit on stablecoins for an extended period in such an environment. A yield-bearing stablecoin, such as Origin Dollar or OETH, allows you to earn a yield, effectively increasing your holdings.
TheNewsCrypto: What kind of threats or risks do yield-generating stablecoins pose?
JF: As for potential threats or challenges posed to these asset classes, there are several risks to consider. It’s crucial to understand how the system works and what you’re getting into. People’s comfort levels with certain types of risks may vary.
One non-existent risk worth highlighting is counterparty risk. In traditional finance, when you entrust your money to a bank, they often lend it out multiple times, potentially jeopardizing your access to it. In DeFi, lending is overcollateralized, minimizing this risk. If funds are unavailable, collateral can be sold to compensate you. So, there’s no counterparty risk, and it’s a one-to-one collateralization system, significantly safer than traditional fractional reserve lending.
Instead, the primary risk you assume in DeFi is smart contract risk. Origin undergoes extensive security measures, including audits by top firms like Trail of Bits and OpenZeppelin, as well as extensive battle-tested infrastructure with hundreds of millions of dollars in capital.
There’s always some residual risk. The industry still experiences hacks and vulnerabilities, so it’s essential for both developers and users to take this risk seriously. Evaluating a protocol’s safety often involves considering its time in operation and the volume of assets it manages. Origin has been live since 2020 and has managed hundreds of millions of dollars, providing a track record users can trust.
TheNewsCrypto: Facing a persistent pattern of attackers and exploiters employing identical techniques to exploit smart contract vulnerabilities, what advice would you offer to protocol creators to bolster their platform’s security?
JF: There are several critical safety practices to implement. First thing, don’t reinvent the wheel whenever you can. It’s acceptable to draw inspiration from or reuse battle-tested code. For instance, if you’re launching something new, you can adopt the approaches used by established projects like Uniswap, Compound, or Aave. Their code has withstood the test of time.
However, there are inherent risks when copying code. You might overlook certain aspects. For example, some have copied Compound’s code without realizing that vulnerabilities emerge when adding certain tokens —that Compound hasn’t included—to their lending platform. When others fork the code without a clear understanding of its workings, they might introduce unsafe elements that can lead to the entire system collapsing. These oversights can lead to serious issues, as we’ve unfortunately witnessed on multiple occasions. This underscores the need for a deep understanding of what you’re doing, robust security practices, and comprehensive audits.
Often, it comes down to the basics. At Origin, we heavily rely on checklists, addressing questions like, “Have you considered reentrancy?” and more. We methodically go through these checklists each time we modify code, ensuring that every pull request undergoes thorough scrutiny. Multiple senior engineers review each change before it’s merged into a repository. We also involve auditing firms like OpenZeppelin to verify every deployment on the mainnet. Implementing these practices may slow down the development process, but our users expect and deserve safety as a top priority. It’s our responsibility to safeguard their assets above all else.
TheNewsCrypto: In the realm of DeFi factions, Liquid Staking (LSTFi) has a substantial user base. How does Origin’s OETH token stand out, and what unique benefits does it offer?
JF: Liquid staking is a process where individuals stake Ethereum (ETH) to earn more ETH by securing the network. When you run your validator, you need to lock up 32 ETH, and it takes a while to withdraw it. This setup presents challenges for the average person, as it’s not very liquid, and not everyone has 32 ETH to deploy. Liquid staking tokens address this by enabling people to participate in yield opportunities and reuse their collateral elsewhere. You provide your ETH to a liquid staking platform, which, in return, issues you liquid staking tokens so that you can participate in various DeFi activities.
In DeFi, the goal is to stack your returns and grow your assets. Taking it a step further, we aim to maximize your yield. So, we take the staking tokens from platforms like Lido, Rocket Pool, and Frax Finance and deploy them in DeFi protocols. This includes lending platforms such as Compound, Aave, and Morpho, which sits on top of them, as well as trading platforms like Curve and Balancer. Any rewards we earn from these platforms, whether in the form of tokens like Curve, Convex, Balancer, or Aura, are automatically harvested and used to buy more ETH, which is then redeployed into staking. This results in rapid compound interest without needing you to manage the position or pay gas fees. As more capital is deployed into these strategies, the compounding effect accelerates, benefiting all users participating in this approach.
TheNewsCrypto: How do you see governance in DeFi evolving? Will it ever be able to replace the traditional regulatory structure? Do you have a dedicated DAO?
JF: The concept of DAO governance is very much an ongoing experiment, and we continue to learn from the challenges it presents. Direct democracy comes with its share of challenges. There are parallels to real-world experiments in making collective decisions, such as the representative government system we have in America. The reason we opted for representative governance is that most people lack the time and necessary knowledge to make informed decisions on every single matter. Sometimes, it’s more effective to elect individuals to make decisions on our behalf, trusting them to pay attention to the nuances of those choices. These are the issues we’re exploring.
The core idea is that your assets should be managed by those who have a vested interest in their success. For this purpose, we introduced OGV, which serves as the governance token for both of our yield-earning products, the OUSD and OETH. When you acquire OGV, you can stake it for a period ranging from one month to four years. The longer your staking commitment, the greater your economic and governance power within the protocol. This is crucial to prevent someone from accumulating OGV tokens, voting maliciously, and causing harm to the protocol. With a four-year commitment, any actions that harm the protocol ultimately hurt the individual involved, making it an important design choice.
This approach shifts control to those most committed to the long-term success of the protocol. People who have locked their assets for four years are the ones primarily influencing decisions, not individuals with short-term commitments. Moreover, you’re rewarded for your commitment. A portion of the yield generated by these products is distributed to stakers. Of the yield, 20% is set aside, with half directed toward securing future rewards, which we refer to as “flywheel tokens.” The other half goes to OGV stakers, and the length of your stake determines your share of these tokens.
At Origin, all of our governance is conducted entirely on-chain. We use snapshot voting to gauge sentiment, but any contract upgrades or changes are subject to full decentralized governance with OGV. We’ve also implemented a time lock, ensuring that even if a malicious action is voted in, users have a window to withdraw their funds before it takes effect. This serves as an essential safety feature.
TheNewsCrypto: What’s your take on the regulatory challenges and pressures surrounding cryptocurrencies, particularly in the United States?
JF: When you look at what cryptocurrency represents, it’s indeed a significant threat to traditional finance and the government’s control over your financial transactions. It’s like a peaceful revolution, saying, “I don’t want the government to have the power to decide who I can send my money to. I don’t want them to seize it at any moment. I don’t want them to have that level of control.” This, of course, poses a threat to the dollar and to the U.S. government, as well as governments worldwide, which are accustomed to this authority over your money.
What can we expect? Opposition and challenges are inevitable because it threatens the status quo. On the other hand, it’s frustrating because we see this as the future. When has it ever been productive to combat innovation and technological progress with restrictive laws? It often drives people to seek more crypto-friendly jurisdictions, like Dubai, where innovative projects are flourishing.
It’s nearly impossible to completely stop crypto. You can slow it down and force people to move elsewhere, but this revolution is here to stay. The real question for America is whether it will embrace this change and be at the forefront of innovation or risk getting left behind.
TheNewsCrypto: Any important updates in the pipeline for Origin Protocol that the crypto community should be aware of?
JF: One thing that’s currently happening is EigenLayer. We’re enabling re-staking. Our idea is that when you’re staking your ETH to secure the well-known network, why not use the same collateral to secure other networks simultaneously?
We’re currently running a competition determining the next liquid staking tokens on the EigenLayer. Origin ETH (OETH) is one of the tokens on the shortlist. So, if users are holding LSTs, whether it’s OETH or others, they could vote for Origin ETH in that competition.
I believe we already have enough votes to make it onto the list. The more votes we receive, the faster we can integrate it. So, we appreciate everyone’s support in helping us rise to the top of that leaderboard.
Disclaimer: The information provided in this interview article is for informational purposes only. It is not intended to be, nor should it be construed as, investment advice, financial guidance, or a recommendation to make any specific decisions. Readers are encouraged to conduct their own research.
