Name: Balancing the Ledger: Abra's Goal Is to 'Build the WhatsApp of Money'
Uploaded: 2019-02-22
Duration: 11 min 22 s
Description: Abra founder and CEO Bill Barhydt discusses on this week's episode.

[ MUSIC ] Welcome to Balancing the Ledger, where tech and finance intersect. I'm Robert Hackett. I'm Jeff Roberts. And today, we're joined by Bill Barhydt, the CEO and founder of Abra. Thanks for being here, Bill. My pleasure, thanks for having me. All right, so let's right in and tell us a little about this app that you've built. Sure, Abra is a global investing app Consumers in 155 countries today can invest in myriad cryptocurrencies and fiat currencies and exchange between them. So there is like 50 fiat currencies supported, 30 cryptocurrencies in, Coins and you can literally buy and exchange between them. And a couple of weeks ago, we announced that we're adding support for NASDAQ and US equities, so that consumers starting outside the US will be able to get Get investment exposure to the top 100 different stocks and ETFs in the Nasdaq. And then hopefully we'll bring that to the U. S. as well. But what's really cool about this is it uses a bitcoin based smart contract platform to enable this investment exposure, which is why we're able to accomplish this feat across, you know, consumers in over 100 countries that I believe no one else has ever been able to. Accomplish our goal is to build the whatsapp for money right, we have with whatsapp we have a single app globally where we can message each other. We don't have a single app globally for financial services, if I want to invest, if I wanna send money, if I wanna get credit. Today I have to use services that are unique To each specific country that I live in. Whereas with Abra our goal is to build one app that will service every single consumer in the world and leverage crypto to democratize access to financial services. Can you explain this smart contract a little more because I mean I think most of us assocaite smart contracts With the theorem of Bitcoins, Yeah. What exactly do you mean by- Sure. Going back smart contract? Sure, Bitcoin does actually support very simple smart contracts. And it is not as complex as a theorem but it turns out that it does exactly what Abra needs to enable these types of investments through our App. All right, so if you wanna buy let's say $ 1, 000 worth of XRP or in the future $ 1, 000 worth of Apple. What you're actually doing in the background is putting $ 1, 000 worth of BitCoin into a smart contract and then you enter into that agreement with Abra and Abra adjust the amount of BitCoin the you're holding so that it stay equal to the value of the asset you're investing in. Where does the smart contract fit in now? I can understand it by an equivalent amount of Bitcoin that would track the price of an Apple stock or XRP. But that's not really a smart contract. It's a multi- sig script using the Bitcoin scripting language. Which is a smart contract and so you sign the transaction as the consumer and then ABRA signs the transaction as the counterparty. And then at settlement time, it causes a certain amount of Bitcoin to move in either direction. Depending upon what's happened to the price of Apple in the example that we gave. And is most of this written on chain or? It'sd all, 100 % of our transaction settle on chain. And that's very important [ UNKNOWN ] And there is no other way to do it because the consumer is actually holding their collateral at all times Abra has no access to it unless we're actually earning money on those contracts that I mentioned and that's a fantastic feature because that means that Abra can't be hacked in order to steal consumer funds because we don't have them, Meaning consumer is always holding their own crypto with Abra And it simply creates a really cool simple user experience, right? Just like other payment apps to enable these investments without exposing all the tech mumbo jumbo to the consumer. One last thing about the US dollars that remains relatively stable over time sure it inflates, and bitcoinbelievers like to knock that but. With your app, if you're going to be conducting trades with BitCoin, doesn't that add substantially greater risk into the equation? It would if we didn't do what we were doing. So, by the way, a dollar stays stable relative to the dollar just like Bitcoin stays stable relative to Bitcoin so. Just to be clear, both are volatile relative to other asset classes, right? Now, if you're using Bitcoin as the collateral basis for these contracts and you're calculating the value in dollars, then you have volatility risk which is what you're implying in your question. Part of the solution we built eliminates that volatility risk, so we have two effective solutions running in parallel. The first is the technology That creates these smart contracts. And the second is the trading solution that eliminates that volatility risk. It's a hedging platform that in real time hedges away the volatility risk in these products. We've processed close to $ 1 billion in transaction volume using this. Its hedging system and consumers didn't lose a penny. So for example, last year when the price of bitcoin fell I think like 85 %, any consumers who were holding fiat via these smart contracts were getting lots of incremental bitcoin from [ UNKNOWN ]. Well, where was that bitcoin coming from and why didn't [ UNKNOWN ] go broke. The reality is we actually made very good revenue last year because the hedging system worked perfectly in terms of making the consumers whole as the price of Bitcoin was falling. So it did exactly what it was designed to do. And who are the counter parties on your hedging contracts? So it depends on the type of asset. So in the case of a Fiat position We're actually borrowing Bitcoin on the open market and then selling it in exchange for whatever the asset class is that you're hedging against. In that example, dollars. And there's different ways to do it depending upon whether you're investing in fiat currencies or old coins or stocks, but basically it's similar to what like a hedge fund would do by working with a prime brokerage, for example. Tons of companies have been coming out with their own stable coins. What is your view on this trend? Yeah, to us they're another asset. So we're launching a native etherwallet inside of Abra. So we'll support Bitcoin and Ether as native asset classes. And so the stable coins are like ERC20- based, which is one of these. Contract formats, which support stablecoins, then we'll happily support them. If they help our consumers get money in and out of the system, and are consumer- friendly, so I don't have to explain what a smart contract is, what a private key is, what a public key is? Then we're happy to use it, if it helps our consumers, right? If it's just tech for the sake of tech We're probably not interested. But I do think that some of these stable coins could represent interesting on ramps and off ramps. Depending upon where people live, whether they're banked or unbanked, we'll see over time. And Bill, how many customers does ABRA have right now? So we have hundreds of thousands of users across over 100 countries. And like I said, they've processed almost $ 1 billion in transaction volume in our system. We've only been live. We came out of beta about 11 months ago. And were in beta for about three months before that, with just a couple of assets. And so the system has really taken off, and we're really quite excited by the traction we've gotten. One of the value propositions that you articulated is that you open up access to foreign markets- That's right. To be able to participate in equity markets in the US. That's right. Where are you seeing the biggest uptick? Where's the most interest for this? So we announced this two weeks ago, right? Just to basically get a feel for where consumers would be interested. That was really part of the reason we announced it early. We wanted to know exactly what the answer to your question was. We've gotten interest in places like, significant interest in, like, India. Indonesia, Argentina, Venezuela, which really surprised me. Because a lot of the content via talking to folks like yourself is in English. So we have some highly motivated people who are really interested in this. And some U. S. interest but it's actually been like. Massively outweighed by international interests, and that makes sense. You have a lot of ways to buy stocks right now. We get that. And so we think that the big interest in this is predominantly gonna come from outside the US. Bill, I just wanna jump to the bigger picture for a sec. When talking before You know we're discussing how people are saying BitCoin is 1995, like the advent of Netscape. You know, so we're gonna open up soon or early days. But you were at Netscape in 1995 so I'd like to know how much, you know when people make that analogy, how correct is it? I mean there's so many parrallels to what I feel like we went through in those days. From scaling debates to anybody who's in the bitcoin world knows what I'm talking about. People talked about how the internet just wasn't going to be able to handle the increasing load from the new found web traffic, right. The founder of ethernet, the creator of ethernet Metcalfe said that the internet was about to go supernova in 1996, cause it couldn't handle the traffic. Well that was obviously wrong, it turned out that was a software problem. Right, and I think the challenges for getting bitcoin, for example the ( inaudible ) are also software problems. They're complex software problems cause there is no dictator deciding how the system has to work, but I see a lot of parallels there. We went through this craziness in the late nineties where, For about a year and a half, everybody was talking about this term extranet. Extranet was basically taking the internet and making it work inside the firewall. It's exactly what happened with all this enterprise blockchain nonsense, where people have this fallacy idea that they're gonna. To make blockchain work inside the firewall. It's all gonna fail miserably just like people realized Extranet was a waste of time. It was all about the Internet. I think that people will realize it's all about a truly decentralized cryptocurrency in a private blockchain. It just makes no sense. Perhaps we already know your response. But how do you feel about J. P. Morgan coin, which just came out the other day? I think the coin was a bit of misnomer, I think it's really a ledger, that's meant for settling trades. It's possible that Depending upon how they architected this, it may not be what I'm talking about, in terms of a true, private blockchain. I think the press got a little bit of the, it's a coin, message wrong. And that may be on JP Morgan for not explaining it correctly, so won't put it on the press. But I used to work at Goldman, and I know that straight through processing in terms of trade settlement has always been a big deal. I haven't dug in enough to know if what they're doing actually solves that problem. Isn't the private blockchain? I don't know, it's haven't eplained very well. And from what I undestand isn't really a coin, even though that's what the press has picked up on. So it may also just be a private blockchain in a way it's traditionally defined, I have to dig in more. But if it is really is a private blockchain and a private coin, I'm guessing it's a complete waste of time. But I don't know for sure if that's what it is You also mentioned that the scaling debates back in the Netscape era seem to echo what's happening now in BitCoin. What do you think is the right way for BitCoin to scale? I think that the way it's going now is fine. I think that we're going towards a kind of a multi tiered solution where there's going to be an on chain layer one, what we call settlement layer, Which is gonna have relatively small blocks and then you're gonna have layer two like you've heard about lightning and there is other competing technologies, And then there is [ UNKNOWN ] Which in some ways is like layer three which is a consumer facing user experience and all three layers will work together in concert to really have a scalable A network where if you're just doing on change transactions. Would be a public private key wallet. Where you host the keys. That's completely decentralized trustless environment. And if you're in layer three you probably introduce a certain amount of trust. Into the solution even though you may be holding your private keys. And it gets a little esoteric and complicated as to what that means in- between. But all three layers will together to create a scalable model for BitCoin in my opinion. Okay, so it �� s a combination of factor comings together. Absolutely. [ UNKNOWN ] thank you, that �� s all we �� ve got time today. Thanks so much for being on the show Bill. My pleasure, thanks for having me. I �� m [ UNKNOWN ]. I �� m Jeff Roberts, for more balancing ledger please get a [ UNKNOWN ] See you next time. [ MUSIC ]

Balancing the Ledger: Abra's Goal Is to "Build the WhatsApp of Money"

Finance

Abra founder and CEO Bill Barhydt discusses on this week's episode.