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Abra goes Global, But Nobody Knows How it Works

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With Abra, Bill Barhydt (CEO) aims to democratize digital money by introducing an easy-to-use peer-to-peer (P2P) global money transfer platform in 50 countries throughout the world without ever having access to, or being a custodian of, users’ funds. According to Barhydt, Abra combines a complicated backend with a simple frontend. In the background, the app stores a smart contract holding hedged bitcoin, while in the UI, it displays simple fiat currency.

An Unnecessary Secrecy

Apparently, the financial engineering behind Abra is so complicated that nobody has been told exactly how it works. In an email reply to the author, Barhydt was elusive, “(It’s) too involved to answer via email…The system works, and it works well.” Barhydt has been very secretive about his tech, and during the last few years in which Abra has been in development, he has never given the public a technical explanation of how it works. He has promised several times over the last year that he would be posting a series of blog articles explaining the tech behind Abra “next week” or “in the coming weeks.” But these blog posts have never appeared. Barhydt always claims that he is too busy launching Abra to take the time to explain the technology.

Barhydt is kind of like the Captain Ahab of bitcoin entrepreneurs. His obsession, although not with a giant whale, is the concept of transferring fiat money globally between two phones. You can see by the rapid and manic way he talks about it that this is his passion, he wants to be the pioneer and leader of cross-border mobile banking services.

Abra is the second company Barhydt has created with Pete Kelly to solve this riddle; the first was called Boom Financial which did not use Bitcoin, was not peer-to-peer, and operated using banks in a centralized environment. Boom was also focused on creating internet banking in developing countries and pawned as a humanitarian cause, but was sold to Digicel, who was also Boom’s lead investor. Abra has been well funded by a number of investors including American Express and Barry Silbert’s Digital Currency Group.

The benchmark for introducing new tech in the FinTech scene is with a white paper. Most new FinTech concepts have been initially explained publicly in a white paper; this is how the community has worked. It is open, and people collaborate to make new ideas and new tech a reality. In this way, they are also exposed to peer review and test out new software in a very efficient way to prevent fatal bugs or flaws which could lead to system failure and lost money.

Barhydt says that he invented a “synthetic currency,” but Abra has no whitepaper, Barhydt is not on Github, and the details of this advanced and novel technology that he is showcasing has not been revealed to the public and has not undergone a comprehensive auditing by the public or experts in the FinTech arena. At this time, Abra is only active in the United States and the Philippines, but it will be launching globally before the end of February, and the lack of transparency is a little unsettling.

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A Bumpy Start in the Philippines

Additionally, Abra has claimed to have launched nationwide and tested successfully in the Philippines, but this is not entirely accurate. The tellers available in the Philippines, as listed in the Abra app, are only retail tellers and consist mostly of LBC Stores and Tambunting Pawnshops. However, the LBC Stores, which make up the majority of the tellers in the Philippines, are currently declining Abra transactions. An employee at one LBC store explained, “Our Abra system is under maintenance, we have never done an Abra transaction. We were told to hold off by our head office.”

Two complaints posted in the Play store are also worth examining. Firstly, there is an option for users to add/withdraw money to/from a bank account, and this might be the only alternative available to tellers to cash out. However, a user from the Philippines commented on her experience with this service.  Two thirds of the user’s money was lost when she chose the option to withdraw to her bank account, and she was never informed that such a large fee would be deducted.

A second user who left a review on Play store claimed that he was unable to restore his wallet backup when transferring from an iPhone to an Android phone.

Part of the attraction of Abra is that it uses bitcoin invisibly in the background to make it simpler for mainstream fiat users. But people who are not familiar with bitcoin will not understand the importance of taking the necessary precautions, which bitcoin users are familiar with, to safeguard their money. The UI of the app seems not to be very well thought out. The ‘backup wallet’ function is difficult to find. Users who are not tech-savvy will most likely never find it or recognize the importance of using it which could be disastrous. If a teller or user loads a large sum of money on his Abra app and has neglected to back up his wallet, he would lose all his money permanently if his phone is stolen, lost, or reformatted.

Another significant point to consider is whether the Bitcoin network can handle Abra. There is the potential, if the app becomes very popular, of a massive onboarding of mainstream fiat users. Nick Szabo, in his latest blog post, has stated, “…the Bitcoin blockchain cannot process as many transactions per second as a traditional payment network such as PayPal or Visa… the Bitcoin blockchain itself cannot possibly come anywhere near Visa transaction-per-second numbers and maintain the automated integrity that creates its distinctive advantages versus these traditional financial systems.”

Greater Scrutiny Needed?

With such a huge ambition; to create a global P2P money transfer system across all currencies, sent/received within a smartphone app, the lack of a precise technical explanation seems cagey. Without the proper technical and social auditing to ensure that user funds are secure, there could be a serious mishap. Smart contracts, such as TheDAO, are notorious for being hacked. Developing countries, which are Abra’s target market, should not serve as experimental grounds. A lack of security and proper auditing on a testnet with a bug bounty program could hurt people who are already struggling in poverty.

In reality, Abra is selling the illusion of money, with new technology utilizing smart contracts and bitcoin, and calling it simple fiat, but without proper inspection of this ground-breaking innovation, the possibility of the discovery of bugs and flaws when it is already too late remains. What will be the cost of maintaining this ambiguity? Abra cadabra, your money is gone?