Crypto startup Abra to make all-in-one global investing app

April 11, 2019 14:45
Abra enables users to invest in traditional stocks, ETFs, and crypto assets with a single app, according to founder Bill Barhydt. Photo: Abra

US-based cryptocurrency startup Abra aims to be an all-in-one global investment app, according to founder Bull Barhydt.

In a recent interview with EJ Insight, Barhydt, an early Netscape employee, shared his vision for the company he founded five years ago, how he brought innovation and simplicity to cryptocurrency investing, and what he saw as the "Netscape moment" in the emerging crypto space.

Basically a crypto wallet application, Abra uses blockchain technology to enable users to invest in, store, deposit and withdraw cryptocurrencies and fiat currencies without the technical complications.

Users across 155 countries can invest in cryptocurrencies, fiat currencies, and traditional investment assets like stocks, exchange-traded funds and commodities via the mobile-based platform.

Abra is providing the service by using its “crypto-collateralized contracts”.

Barhydt explains: “Let's say you want to buy HK$1,000 worth of the Apple stocks. The first step is that your money is converted into bitcoin in the Abra app. Using the programmable aspects of Bitcoin, Abra is able to create a multi-signature smart contract that can automatically adjust to both the price of Bitcoin and the price of Apple, so that the two are always pegged to match the initial investment.”

“The contract simply says if the value of Apple versus Bitcoin goes up, you're going to get more Bitcoin, and if the Apple versus Bitcoin goes down, you're going to lose Bitcoin,” he said.

While the actual collateral is held in Bitcoin, Abra users still see the value reflected in whatever currency they prefer, such as the US dollar or yuan, and they will see the same profits or losses as the actual asset itself.

The contact also makes sure that the price of Bitcoin and the price of the user’s investment target – Apple stocks in this case – are always pegged to match the initial investment.

“Last year when the price of Bitcoin fell 85 percent, we were constantly adding Bitcoin to everyone's wallets, to make them whole,” said Barhydt, while in the background, Abra is constantly hedging away risk from its business model.

With this proprietary solution, Barhydt believes Abra can give customers investment exposure to virtually any type of real-world assets.

Easy-to-use application

But he stressed that the importance of Abra is its easy-to-use application that puts the complexity of Bitcoin and blockchain technology in the background.

“Just like you have no idea what happens when you push play on Netflix, you should have no idea what happens when you buy Apple shares using crypto-based smart contracts,” he said. “It just works.”

For Barhydt, creating a seamless user experience is key to the global mass adoption of cryptocurrency investing, which is Abra's goal.

“Abra's long-term vision is to democratize access to financial services. I want to create a single app like WeChat in China or WhatsApp globally, which allows people to perform any kind of financial transaction, regardless of what country they live in,” he said.

Investors are convinced. The Silicon Valley startup has received backing from heavyweight investors such as American Express Ventures, First Round Capital, Arbor Ventures, and HCM Capital, a venture capital arm of Foxconn Technology Group.

In the interview, Barhydt reveals his expansion plans in Asia, where there are many burgeoning cryptocurrency investor markets, like Japan, South Korea, China, and the Southeast Asia region.

Right now, Asia-based users can fund their Abra accounts via multiple major cryptocurrencies. “It's on the Abra roadmap to enable users to be able to just wire money to Abra, from your Hong Kong bank, Singapore bank, or your Chinese bank, and we will convert via our partners the money to Bitcoin, and use that as the basis for your investment.”

He also said the firm has been testing other methods, which are aimed at luring the huge unbanked and underbanked population in the region, such as a cash network system of human tellers in the Philippines.

However, the practice faces the challenge of a huge establishment cost. “Once we feel that we've expanded [in Asia], to get deep enough, I want to start adding more cash locations,” said Barhydt, “but that's going to be probably like 18 months from now.”

Despite the volatility in the crypto market in the past year or two, Barhydt said there have been significant developments in the industry.

Social media giant Facebook is said to be building a fiat-pegged cryptocurrency on its messaging app WhatsApp, first focusing on the Indian remittance and money transfer market.

Facebook has also revealed plans to raise as much as US$1 billion from venture capitalists to support its cryptocurrency effort.

Barhydt believes the social network “has a huge opportunity” to be a real game changer.

However, he said the “Facebook Coin”, or “WhatsApp Coin” as it is called in the market, should be “a truly global decentralized cryptocurrency”.

It also has to deal with the challenge of on- and off-ramps for physical money moving into the crypto asset field.

Killer app for cryptocurrency

For now, the exchange between fiat currencies and the crypto has remained tedious. At present, the process of customers depositing and withdrawing with cash requires a long time to execute. Many see it as a huge hurdle to the widespread adoption of the cryptocurrency.

“The challenge for Facebook is they still have to deal with the same on-ramp and off-ramp issues,” said Barhydt. “Cross-border money transfer solutions already exist in those countries. If Facebook Coin doesn't work everywhere [on the ground], why is [Facebook Coin] better?”

Considering the market hype, many compare Bitcoin to the dotcom bubble in the late 1990s. But for  Barhydt, Abra provides the opportunity to become a killer app for the cryptocurrency, “just like Netscape was for the internet in the 1990s”.

After working for the US Central Intelligence Agency, the National Aeronautics and Space Administration and Goldman Sachs, Barhydt decided to join Netscape, working on telecommunications and internet banking deals. He later became a business development executive at Netscape Communications Corporation.

The tech industry veteran said the widespread criticisms against cryptocurrency draws parallels with the internet in the 1990s.

“We used to have this discussion all the time in the mid-90s, that IPV4, which is the way you type in addresses, wasn't going to scale, and we're running out of internet addresses. I think that's a pretty good analogy to that in the blockchain world,” he said, referring to criticisms against Bitcoin’s scalability issue that results in an insufficient transaction processing speed.

Barhydt acknowledges the mass market still harbors doubts about Bitcoin and other cryptocurrencies.

“I used to have these discussions in the 1990s, that the internet was for porn and gambling. Now, obviously, the internet is no longer just for porn and gambling, but it's everything,” he said. “If you talk to the average person over the age of 50 in 1996, they were not online, they were definitely afraid of getting online, but it changed over time.”

He believes as the sector works on enhancing the user experience for cryptocurrency applications, just like the internet technology, which transformed itself from dial-up internet access to home broadband, "things are slowly starting to change”.

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Bill Barhydt is a veteran in the cryptocurrency space and an early Netscape employee. He believes Abra can be the killer app for cryptocurrency as Netscape was for the internet in the 1990s. Photo: Abra

EJ Insight writer