The following article is adapted from a post that originally appeared on the RRE blog in March 2015.
By Bill Barhydt and Jim Robinson
We started Abra because we believe that the first generation of digital currency applications are technical marvels but don’t solve real consumer pain. To make digital currency useful to “cash consumers” digital currency should: be transferable to any phone number in the world, not represent exchange rate risk, be as private as real cash, have no costs for money transfer, and be fungible to real paper-cash at very low cost 24 hours a day, 7 days a week. Abra was designed to fulfill all of these needs.
Our “marketing description of Abra:”
With Abra, digital cash (equivalent to US Dollars) is stored directly on the smartphone. Instantly transfer money peer to peer to any phone number in the world… Abra never touches your money. Abra merges money transfer and payments via a single digital cash wallet that works ubiquitously anywhere in the world. There is no bank or other third party involved in managing, storing, remitting or accepting your money. Abra represents the next generation of digital cash applications but without the technical fuss.
Technically put, Abra is digital cash stored directly on your phone, guaranteed in US Dollars. Abra app-based transfers use the blockchain to settle, and transactions are published directly to the blockchain from your phone. Abra’s back-end servers never touch consumer’s money or their transfer requests. The value of the holdings in your wallet do NOT fluctuate with the value of Bitcoin for at least 3 days after initial deposit onto your phone [editor’s note: since this note was written, Abra updated its policy and now the value of the holdings in your wallet will not fluctuate for as long as you hold that currency, regardless of how long it’s been since you deposited those funds.] Abra is not a financial service — it is an app that facilitates storing digital currency equivalent to US Dollars directly on your smartphone and transferring your money from your Abra App to any other Abra App anywhere in the world.
To make Abra accessible to consumers globally we are launching a network of Abra Tellers. Tellers are like mobile airtime agents. Instead of selling airtime, Abra Tellers sell and buy digital currency. Think of them as human ATM’s. In the US, consumers with supported ATM cards will be able to add digital cash to their smartphone with their ATM card and pin. This is a US first. Those using an ATM card to buy digital cash via one of Abra’s exchange partners will need to provide ID. Others do not have to register with Abra at all. All Abra Tellers are background-checked, similar in fashion to Uber or Lyft drivers.
Abra began Teller sign-ups yesterday in advance of a full service launch. We’ve been playing with builds of the App and we love it. It’s the digital cash app we’ve always wanted for ourselves.
To design Abra we turned to the traditional Hawala model. The concept of a Hawala dates back to the 8th century. Hawaladars are people who collect and hand out money on behalf of others over long distances. Hawaladars settle with each other via barter transactions, netting out reverse transactions, or in modern times via bank wires if necessary. Traditional Hawala’s are generally illegal in the United States as no one is allowed to hold or remit funds on behalf of someone else without being a licensed money transmitter both with FinCen (the Financial Crimes Enforcement Network) and with the US State regulators where the consumers’ reside. In the case of Abra, however, consumers and Tellers are always holding their own money just as with the standard open source Bitcoin software. Abra Tellers simply buy and sell digital currency directly to and from other consumers in their neighborhood in small amounts.
Funds are stored in US Dollars so there is no foreign exchange taking place. Consumers send money peer-to-peer directly via the blockchain. As everyone is always holding their own money in their Abra App and no third party directly facilitates the transfer of money, money transfer laws don’t apply and no foreign exchange happens.
Abra Tellers are strictly forbidden from knowingly buying or selling digital cash to any person that they believe would use the App for illicit means.
A real world example can help illustrate how Abra works:
Bill in San Jose wants to send $100 to Nancy in Mexico. Bill finds an Abra Teller, Sebastian in downtown San Jose. Sebastian charges 1.5% for selling digital currency to Bill. Bill arranges to meet Sebastian from the Abra App. When they meet, Bill hands Sebastian $101.50 representing the $100 in digital currency and the $1.50 fee. Sebastian’s Abra App then transfers the digital currency directly to Bill’s phone. Bill then transfers $100 in digital currency to Nancy’s phone in Mexico.
To get access to the cash in Mexico, Nancy finds an Abra Teller, Miguel, in her neighborhood and sells the digital currency to him in exchange for Pesos. If both parties charge 1.5% for buying and selling the digital currency then they have saved a fortune in fees versus traditional money transfer services that can charge upwards of 8%, 9%, or more, for such transactions.
Why are Sebastian and Miguel likely willing to provide these services for a 1.5% fee or even less?
Consider that Sebastian and Miguel already provide some form of service in their neighborhood for cash. In the case of Sebastian that means he already has to deliver cash to his bank every day for safekeeping. Adding a little more cash to the mix costs him nothing and earns a few more dollars in fees every day and certainly puts him in the good graces of his friends and customers. In the case of Miguel he takes in a lot of cash via his current businesses, selling prepaid airtime and his Bodega store. Buying digital currency helps him manage all of his cash at no cost while actually making a little extra money in the process. This is a real win-win.
You might be wondering… How does Sebastian get access to digital currency to sell and how does Miguel sell the digital currency he has bought from consumers. Simple. The Abra App has a built in “Teller” function that allows Tellers to easily buy and sell digital currency similar to the manner in which they buy and sell airtime. They can do this for cash themselves or via their bank account. The difference between the cost of this transaction and the fees charged to the consumer is the Teller’s personal profit.
You can sign up for Abra and let us know if you want to be an Abra Teller by going to Abra’s website. Help us make Abra better by giving us ideas and suggestions on how to improve the service design and make it useful for everyone!