Today, Abra announced a new version of our smartphone app and exchange service, which enables investing in 20 cryptocurrencies and 50 fiat currencies as well as the real-time exchange across all 70 currencies. This is the first time a platform is offering 20 cryptocurrencies plus 50 fiat currencies in a single wallet with real-time exchange across all 70 and no third party custodian.
How was Abra able to achieve something that no other company in the crypto space was able to achieve? The answer lies in our new smart contract-based investment platform.
Abra has developed a unique multi-sig smart contract-based investment platform that allows us to create synthetic digital assets (e.g. stablecoins) based on Litecoin or Bitcoin. Abra has been using stablecoins in USD, EUR, JPY, KRW, etc. and our platform has already seen hundreds of millions of dollars worth of transactions using the same technology. We are now extending this technology to create synthetic digital assets that includes other cryptocurrencies. In other words, Abra gives you investment exposure to cryptocurrencies or fiat currencies without actually holding the physical currency.
These multi-sig contracts based on P2SH scripts on the Litecoin and Bitcoin blockchains simulate investment contracts the way a gold ETF is a contract based on USD. In the case of a gold contract, if the value of gold goes up, the user gets more USD, and if the value of gold goes down, the user loses USD. Abra is doing the same thing but using Litecoin and Bitcoin instead of USD with Abra acting as the counterparty (i.e. the other signatory) to the P2SH scripts. Abra now runs a market making operation that hedges away our counterparty risk on these scripts. We’ve been running this operation to manage fiat, Bitcoin and ether counterparty risk for over a year now with no service interruptions. We’ve extended this market making capability to include the altcoins launched today.
Today these P2SH scripts are 2 of 2 multi-sig scripts with Abra acting as the second signature. Abra intends to add an Oracle function as a third signature, likely in another legal jurisdiction, later this year.
Abra has chosen Litecoin as the primary asset class for our investment platform although we now have the ability to move users between Bitcoin and Litecoin contracts. We chose Litecoin after a long and thorough research process to determine the asset class that met our criterion: secure, safe, scalable on-chain and off-chain, low mining fees, and preferably with adherence to the published Bitcoin core roadmap. We believe that Bitcoin will always be slightly more secure than Litecoin due mainly to its smaller block size – many refer to Litecoin as digital silver vs Bitcoin’s digital gold. But this small security tradeoff means lower mining fees and more on chain scaling for our users. We believe that Litecoin is the best choice today for these contracts.
“I’m excited to see Abra has chosen to use the Litecoin network in the newest iteration of its app,” said Charlie Lee, Founder of Litecoin. “Litecoin’s unique combination of low fees, high throughput and secure immutable transactions is a great fit for its use as programmable money.”
Why does this matter?
This synthetic currency technology is a breakthrough on several levels: 1. Abra can quickly add additional cryptocurrencies to the app once they pass our rigid analysis around liquidity, contract market making and other factors 2. consumers in any country can now invest in any asset class regardless of where the asset originated.
“Abra has developed an easy-to-use app for managing investments in crypto currencies,” said Dan Boneh, Professor of Computer Science and head of the Applied Cryptography Group at Stanford University. “Their use of multi-sig technology in bitcoin and litecoin to create investment contracts is quite powerful. That they have done it in a super user-friendly way is commendable.”
While we’re starting with cryptocurrencies, this model can be extended to stocks, bonds, commodities, etc. The same app can be used to send money as well as invest. We’re truly becoming the crypto bank!