• Bianca Chen

Exclusive interview with the founder of ABRA:Bill Barhydt

It is our pleasure to include Bill Barhydt, the founder of digital currency wallet, ABRA, in today’s interview. Bill Barhydt has a long-term focus on information technology and nearly 30 years of work experience in this field. He is active in the Bitcoin community, providing consulting services to a wide range of companies, including the digital currency and blockchain technology incubator Boost VC. He also advises federal and international regulations on digital currency and decentralized trading systems. In 2000, the World Economic Forum awarded him the Technology Pioneer Award. And in 2014, Bill founded ABRA in Silicon Valley, USA, aiming to make digital currency investment more concise, more convenient, and more popular. Users can purchase, store, and invest in digital currencies through the ABRA wallet. Today, Bill will discuss with us stories outside the documentary and how he turned the handheld phone into a transaction bank, as well as the secret behind the digital currency wallet transaction.

Bill Barhydt (Left) with Bianca Chen (Right)

Bianca: When did you hear about bitcoin for the first time?

Bill: I first read about the bitcoin white paper maybe three or four months after it was posted on the Internet. And at the time it was so radical and very hard to understand. But it seemed like there was a chance that this person or people had solved this so-called double spend problem, which was the basis for having a decentralized digital currency. So, I thought if this guy really solved this so-called double spend problem, this is huge, and nobody's talking about this yet. And I got very excited right away, even though I didn't totally understand everything that I had read the first time.

Bianca: What's going to be the biggest change blockchain is going to bring to this world in your opinion?

I think blockchain and the cryptocurrency technology that it enables is going to change finance. It's going to change banking. It's going to change how money is stored. It's going to change the nature of what it means to have a reserve currency. And then later it's going to change how banking itself works, both for retail as well as for businesses.

Bianca: So, tell us a little bit more about traditional banking. How the money is transferred now? What kind of procedure do they have to go through?

Bill: Traditionally a bank wire involves multiple parties. There is the sending institution which could be a bank or it could be Western Union or PayPal or somebody like that. Then it involves other banks in the middle that you don't see. We call those correspondent banks Those are banks that actually at the border connect the U.S. banking system to let's say Germany. The German banking system. So, there would be another correspondent bank on the German side that would then route that transaction to the receiving bank on the other side. What does this mean to the consumer? Well it means one, there's a lot of hands out in the pie. Everybody is doing these transactions to make money. So, the more hands that are in the pie, the more cost there is to the consumer.

Second, each of these entities has to deal with their own types of regulation. They need to know who you are. They need to know where the transaction is going. It adds a lot of friction and overhead and a lot of people are in your business now. Why does some correspondent bank in Germany that I've never heard of need to know who I am so that I can send money to somebody in Germany? It makes no sense. So, with bitcoin, all those middlemen are gone and it's like me taking money out of my pocket and handing it to you. Peer to peer and the bitcoin network settles that transaction, so, everybody knows it happens doesn't actually know that it happened between you and I. It just know that the transaction did happen. And that's the beauty of the Bitcoin model.

Bianca: I see. So, tell us a little bit of the story of how you founded Abra?

Bill: Abra was a direct offshoot of my frustration in dealing with the traditional banking system for my last company Boom Financial. Boom was trying to deploy mobile banking services all over the world and was constantly running into brick walls trying to deal with local regulation, getting banking services in place and a whole bunch of myriad other issues that we ran into. The idea of Abra was to say: can we undo all of that? Use Bitcoin and its underlying technology to create almost a shadow banking system if you will, where you can turn your own phone into a bank. With Abra you are actually storing the cash on your phone. I can store cryptocurrencies on my phone. I can store dollars on my phone. I can move between them. I could convert my dollars into bitcoin. I can convert my bitcoin into ether or my ether into Ripple. All using the Abra app without using a centralized banking system. I can also move that money to another phone. Using the peer to peer model that we talked about before. So, I can send bitcoin from my phone and maybe you receive it as Ripple on your phone. Or you send Ripple from your phone and I receive it as dollars on my phone. All again with no central trusted party in the middle. And that was the idea behind Abra. Eliminating the banks from investing, from money transfer and pass those savings onto the consumer. And savings means a few different things. Not only the cost of the transaction, but the time, ,the friction. All of the personal details that I don't need to know about, et cetera, et cetera.

Bianca: So, once I give the bitcoin, for example I want to get some Ripple. Abra is going to go through certain exchanges to get that transferred to me?

Bill: You're holding a private key on your phone. This private key represents your entries on the blockchain, whether it's bitcoin blockchain or the litecoin blockchain. That's the wallet of Abra. Abra does not have access to that private key. You own it. It's on the phone. One of the beauties of our model is you can't hack Abra because the key is on the phone. So, if we have 100 million users, you would have to hack 100 million phones. Now back to your comment, Abra is working with all of the large exchanges to source liquidity into our system based upon what currencies you are trying to get investment exposure to. If you're buying Ripple, Abra is also integrated into the exchanges that are trading Ripple. Whatever is happening in the background is totally transparent to you. You don't even know what's happening. You just know that, hey I put a bunch of dollars on the phone using our stable coin model, and you converted those to Ripple. Or if I got tired of my Ripple investment, I might convert it directly to Monero. Or I might convert that back to bitcoin. How that happens is all transparent to the consumer. Now it's very complex what's happening. We use some very complex magic, using smart contracts and what we call synthetic currencies and stable coins, but you don't have to know all that. Just like when you swipe a credit card, there's as many as five banks involved. But you don't know that as a consumer. You just know you get an approved message on the screen. And the same thing with Abra. You don't actually know all the magic that's happening behind the scenes. But it's very complex.

Bianca: Interesting. So, do you have to work with bank in order to make this happen?

Bill: Yes. We only work with banks insofar that you want to take money out of your bank accounts and put it into the Abra system. What's happening there is that the money is going from your bank account to one of our exchange partners to convert it to whichever stable coin you want to deposit into, dollars or yen or euros or whatever. At that point the money is out of the banking system.

Bianca: How fast can the transaction be done?

Bill: The exchanges between cryptocurrencies in our wallets are instant. The transfer from your bank account into Abra depends upon the method that you're using. ACH is next day. Bank wires sometimes same day. Credit card is instant etc. Traditionally, if you do it as a bank wire I mean it would probably take a couple of days. Well you wouldn't send five dollars because it would cost you 25. So nobody would do that. You'd probably want to send a few hundred dollars at least given the high fees for doing the bank wire. But it's going to take at least a couple of days to settle if not longer.

Bianca: How is Abra making money? What's the business model?

Bill: When you do that conversion between dollars and yen or yen and Bitcoin or Bitcoin and Ripple, we set the spot price on that. Just like when you go to the airport and you convert your yen to dollars, Travelex sets the spot price, and they make a spread on that conversion and Abra makes a similar spread on the conversion between currencies in our wallet as well. And that's the primary income for Abra. It’s like a foreign exchange model rather than a broker model.

Bianca: Tell us a little bit more about the role wallet is playing in the ecosystem? Because I heard people including myself thinking wallets can be the most important first step for people to adopt it. Tell us a little more.

Bill: I think it's more than the first step. The wallet technology is the key to cryptocurrency adoption and it comes down to a few key items. Number one is that I have an interface on a smartphone that is as easy to use as my messaging app or the web browser. Number two, I can use the same wallet to exchange between currencies or get money in and out of my bank account into the cryptocurrency wallet. Three, I can share cryptocurrency or regular money fiat money with other people on the Internet. And Abra is one of the few applications that I've ever seen that not only does all of those things but doesn't store the money in a central location, because of our security model that we talked about earlier. That security model is by far the best in the business. So, when you combine all of those factors, it's a real breakthrough. And I think the wallet is the key to consumer cryptocurrency adoption. It's not an exchange. Those are for traders. The wallet is for the average consumer and that's the key to the future of cryptocurrency. Is there a simple consumer application that the consumer is excited to use and that is what we're trying to do at Abra.

Bianca: We have different options, for example wallet like Abra, or exchanges. For example Coinbase has an app for the phone as well, or there are ATM machines, or there's Robinhood offering this kind of app to do the trading. Tell us a little bit more, tell our viewer, what are the pros and cons of each option?

Bill: The exchange model for buying and selling cryptocurrencies is really focused on the trader, meaning somebody who would be using ETrade or Ameritrade to buy stocks is somebody who would want to use an exchange to buy cryptocurrencies. It's not for the average retail investor. You have to know what an order book is. You have to know what a bid ask spread is. You have to know what a limit order is, a stop order. The average person who wants to invest in cryptocurrencies is not interested in any of that. They just want to see the price and press buy and have it work. And that's what Abra is built for. Next is that investment app you mentioned like Robinhood. And there are other examples. Those are good if you already have that trading account. But we have customers in 80 countries. That's an American application you just mentioned. It also supports one or two cryptocurrencies in very specific states in the U.S. Abra is global and supports 25 cryptocurrencies in a wallet model. The other thing to keep in mind is those investment Apps are storing your crypto for you. So if that account gets hacked and they transfer the bitcoins out, it's gone forever. With Abra that is not possible. It is on your phone. I have no access to those cryptocurrency coins at all.

Bianca: This year the price dropped a lot. Do you think this kind of volatility, will influence the trading volume?

Bill: I mean I can only speak for Abra and our business has been growing all year, even when the price is going down or when the price is going up. Because the number of people who are excited about the future of Bitcoin and cryptocurrency technology is growing rapidly and most people who are excited aren't concerned about whether the price is 1000 or 10000, because they believe the price is eventually going to go to 50 or a hundred thousand. So, whatever happens in the short term is not important at this point.

Bianca: What else is influencing consumer behavior?

Bill: Government spending and government borrowing, the lack of faith in the dollar as a reserve currency is driving excitement for a trustless system where there's a fixed amount of the cryptocurrency that will ever be created. Our governments can print as much money as they want forever. So, let's do the basic math. If you have a really valuable baseball trading card, and there's two of them in existence. And all of a sudden I say Oops, there's now four of them in existence. In theory the two that you had before should be worth half as much. Now this is what the governments are doing with money. Today there's so much money. Tomorrow they'll add more. The money we used to have by definition is worthless. Well what gives them the right to decide that my money should be worth less tomorrow than it was today? In my opinion, nothing. They don't have the right to do that. But they're doing it anyway. And so bitcoin says, stop, that's not possible, because only 21 million bitcoin will ever exist. You can't create more than 21 million. And so in that regard, it's the perfect digital gold. People that dig in and understand get so excited about the potential of Bitcoin that it drives investment.