WBD143 Audio Transcription

Bill Barhydt on Libra: The Dawn of Corporate Money

Interview date: Wednesday 24th August 2019

Note: the following is a transcription of my interview with Bill Barhydt from Abra. I have reviewed the transcription but if you find any mistakes, please feel free to email me. You can listen to the original recording here.

To kick-off the What Bitcoin Did Libra series I am joined by Bill Barhydt, the CEO and Founder of Abra. We discuss why Facebook is launching Libra, why they didn't use Bitcoin and why Bill considers Libra as positive.

“We’ve had so many new people talking about Bitcoin that wasn’t talking about it before. Users, politicians, banks, it’s awesome… and it’s just early days.”

— Bill Barhydt

Interview Transcription

Peter McCormack: You said you're doing a podcast?

Bill Barhydt: We do a podcast to announce features and we have an audience of hundreds of thousands that we can market to and it comes and goes depending upon what we announce. So like with Vitalik, between all the sources, it's been seen well over 100,000 times.

Peter McCormack: Wow!

Bill Barhydt: But again, I couldn't basically say, "here's a human rights foundation", nobody would in my audience would care. If it's specific and relevant to what Abra is doing, they care, otherwise they don't care. They might overlap with people who listen to you 100% and we know that, but we can really go deep on stuff that we're launching. Like when we launched Zcash support, we did a really big deep dive on privacy features, like way deeper than your audience would be able to follow.

With Vitalik, we went really deep on scaleability issues around Casper and other stuff and really got into it. But again, stuff that even our audience, I would say that probably 100% will love the first quarter and then it will diminish as the conversation goes on, because it gets probably deeper and deeper and deeper and that's fine. People can choose to go as deep as they want in the topic and we're probably going to focus 80% on that. Now outside the US we have generic investing features that we haven't launched in the US for legal reasons like stock investing.

So we're going to be doing more things around, investing in equities, what it means to invest in developing markets, because we launched fractional share investing, so you can put $5 in Apple shares using Bitcoin smart contracts and stuff like that. So there's some people who are interested in the tech. Honestly that's a little less interesting to me. Way more interesting would be saying, "hey, why would I use Abra to invest if I'm in the Philippines" or in Indonesia or in Russia or wherever. The answer is, "well, we enable the types of investing that you couldn't do before." So that's a new perspective for us because traditionally it's been about crypto.

Peter McCormack: Do you enjoy making the podcast?

Bill Barhydt: Do I enjoy making the podcast? So I enjoy the conversations with the specific people on the specific topics because I help curate them. So I know going in, that if there's something that I'm just not interested in talking about, I'm just going to say no, because it's going to come across. I kind of wear my heart on my sleeve as a personality, so I can't fake interest. So I enjoy it because I'm curating.

But if I had to go and do a podcast on building toys, I'm probably not your guy. But so in that regard, I did one with Adam and Tim, which was a lot of fun. We talked about the early days of crypto, when I was advising his fund and they did Coinbase and other deals. So yeah, that I enjoy, but not from a media like, "let's make sure everybody knows who Bill is perspective," I couldn't care less about that. I mean if Abra could have a billion users and nobody knew who I am, it would be like mission accomplished.

Peter McCormack: Of course!

Bill Barhydt: But that's unlikely because there has to be a face, there has to be a way to generate awareness so that it eventually will feed on itself. But until you get there, content marketing is a really important part of blazing a trail.

Peter McCormack: Well yeah and I think podcasts themselves are almost one of the first go to points for marketing now. If you think right now, if you want to promote Abra, what are your options?

Bill Barhydt: Well you can spend a lot of money on advertising, which in our space, given that it's a niche of a niche, is not smart, at least not in the short term because the ROI is not going to be there. So it's social media, it's events, it's PR, content marketing and content marketing that leverages the other distribution mechanisms that I just alluded to. Content marketing is the content plus social media for the most part and then it's basically person to person sharing, which is also social media. So your options aren't infinite.

We get a lot of people who find Abra via App Store searches for "Bitcoin" or "buy Bitcoin." If you go to Google and type "buy Bitcoin with a credit card", Abra is way at the top, because we've optimized those Google search results, but still that's a fraction of where our users come from. The vast majority come from PR efforts, content marketing efforts, social media efforts and referral programs. But the referral programs are all fed by all the other things I just said.

Peter McCormack: Okay. It's funny when we're talking about whether you enjoy the podcast, because I got into this purely by chance. I actually just interviewed the guy who got me into this, it's a guy called Rich Roll. He's like a vegan athlete in California and he got me into it and two years later I've sat down with him and recorded the show. Nothing to do with Bitcoin, but I was talking to him about it. I have two types of shows I generally tend to do. There's one, like when I interviewed Juthica Chou the other day about...

Bill Barhydt: Oh, she's great!

Peter McCormack: She's great, but it's really not my comfort zone, because we going to talk about a specific subject, the first Bitcoin settled regulated futures. So I have to do a lot of research and I have to have a lot of notes.

Bill Barhydt: The fact that it's Bitcoin at that point is almost secondary, because it could be frozen orange juice concentrate futures and the discussion is more or less the same thing.

Peter McCormack: Pretty much yeah, it's just that they're the first to do a specific thing within the industry.

Bill Barhydt: Correct.

Peter McCormack: But it's just a tough interview for me. I'm coming to interview you and I'm like, "it's Bill, he's got a long history in Bitcoin, we're going to talk about Libra." I actually don't need to have a set of notes and these are the ones I now start to prefer, because they become more like conversations. Pomp does this every show. He can just sit and talk to somebody for two hours, which I think is a real craft.

Bill Barhydt: Oh, I think you're getting there for sure. I think I mentioned this online, I listened to your podcast with the first family of crypto/cannabis and I was just enthralled. I thought it was awesome! I got through my run and I was like, "man, I just ran eight miles, this is awesome. I need more of these!"

Peter McCormack: Yeah, well I did enjoy that one, they were great. I also got stoned during that one, which is the first time I have done in probably six or seven years. They took me to the dispensary, it's not really my thing, because I was paranoid, but I was like, "do you know what? I'm going to have my Elon Musk moment" and yeah, I got stoned! But they're just wonderful people and the rapport the three of them have and the dynamics, it's kind of amazing and I kind of fell a little bit in love with, they call her "Cookie", Bitcoin Mom.

She really took me under her wing. But yeah, I'd like to make more shows like that. I also want to expand, as I was saying to you earlier, outside of Bitcoin because I think there's an opportunity to bring more people in and I don't think I can bring more people in by talking about Taproot. But I can certainly do it by talking about the connection between cannabis and Bitcoin.

Bill Barhydt: Oh for sure!

Peter McCormack: Or Libra, as we're going to talk about today. But before we talk about Libra, because I do want to get into that, because I've got an evolving view on that and I'm becoming more warm to it. But give me an update on Abra, how are things going since we last spoke? Because it's been what, seven months?

Bill Barhydt: Almost a year! So effectively Abra runs three businesses right now and they're all using the same product. What I mean by three businesses is, depending upon the country you're in, you see something slightly different. A lot of that is for legal reasons, meaning we want to have one product globally, but for legal reasons we can't yet do that. So, for example, the country that has every feature that we offer is the Philippines. There you can use Abra to invest in crypto, buy your Bitcoin either in cash in person, or with a bank account and you can also invest in US equities.

So you can do fractional share investing, you can actually buy Microsoft shares and convert those Microsoft shares to Ether. You can buy Ether and convert that to Bitcoin, buy Bitcoin and convert it to US dollars and buy US dollars convert it to DigiByte. So any combination of assets that are supported, you can exchange. So now in other countries we support a subset of all of those capabilities and Philippines has not only become one of our largest markets, but it's also our test ground for everything that we do that's new, because we have the ability legally to do everything we want there.

We have the licensing in place, we have the bank support in place, we have the cash network in place and of course, all of the features. Outside of the Philippines for example, if you go next door to Indonesia, you can do the stock investing, but you can't actually use your bank account yet to buy the Bitcoin, because we don't have the bank integration in Indonesia. We're working on it and so our goal in the next year is to have dozens of countries covered for banking.

So in Indonesia, what you can do with Abra is you can deposit Bitcoin and use that Bitcoin to either buy alt coins, eventually stuff like Libra or Forex, buy dollars or buy Yen or invest in equities. So you can put $5 of Bitcoin in and convert it to Apple shares or Tesla, which is proven wildly popular believe it or not. There's a huge overlap between people who believe in Bitcoin and people who believe in Tesla.

That's one of the interesting things we discovered and that's a global phenomenon. Then in the US, it's slightly different. You have the ability to buy Bitcoin in the app and we have thousands upon thousands of people every day, that use Abra with very simple ACH, which is like your faster pay in the UK to buy Bitcoin quickly. But then they use that also to store dollars to buy other cryptocurrencies. We haven't launched the equity features in the US, we're working with the regulators to figure out a very effective way to do that.

So all of the crypto capabilities are live in the US and the ability to buy Bitcoin. So it's a little bit different depending on the country you're in. Our goal is to converge that, so that it's basically one big set of features globally and the only challenge there, really is regulatory. So there's nuances of what we can do in different countries and we have a pretty good handle on that part, but it's very simple for the user, because you only see in the app what works in your country, when you start the app.

Peter McCormack: Okay and I'm guessing the US is one of the toughest regulatory...

Bill Barhydt: It is the toughest! Like, I don't even know what number two would be.

Peter McCormack: Okay, but you can invest in crypto here now?

Bill Barhydt: Yes.

Peter McCormack: Okay. Can you buy Bitcoin with cash here?

Bill Barhydt: No, so only with your bank account. Now, we were testing a cash network here in the Philippines and a few other countries and it actually worked. There are two issues and I liken this to launching Uber all over the world. Uber thinks about their network in terms of driver liquidity. I can't launch Uber in London, unless I know that everybody who starts the app is going to have a good experience, which in English means they're going to find a driver.

I can't launch a cash network here in Mountain View, unless I know that if somebody starts the app, they're going to find what we call a teller, whether it's a retail teller or an individual, they have to find a teller, otherwise the app is pointless. Now, we signed up tens of thousands of these tellers all over the world. Most of them were in the Philippines, because that's where we concentrated our efforts, but we had them all over the world.

It turned out that launching that network globally was going to cost us probably $100 million. Now you start to see why building Uber is so expensive, because they're effectively subsidizing their drivers in the early days. So Abra is more or less trying to do that with the cash network. So what we did is we focused our efforts on the Philippines to build a retail cash network that works and it actually does a very significant piece of our business now, like double digit percentages of our business come just from our cash network in the Philippines. 

So it's working, but expanding that is very expensive. So we're trying to figure out over the next few years, how do we build the equivalent in Indonesia, in Turkey, in Russia or even in Japan, which is a big cash economy. How do we basically take the cash network and make it work in other countries? So in the US, everything right now is ACH and credit card, so VISA, MasterCard, AMEX. I believe we're also the only company in the world that supports American Express who's one of our investors.

So that payment method issue for us, is something I spend a huge percentage of my personal time on, because it's really the key to growing our business. We have hundreds of thousands of users in well over 50 countries and their ability to use the app via their bank, is the single biggest critical success factor for our future growth.

Peter McCormack: Okay and then the last bit, the investing in the shares, just personally, that's the bit I find kind of most interesting. Are you making essentially, and I'm going to be careful with my language here, because you will correct me, but are you essentially making a bet on the movement or you actually buying the share yourself on their behalf, but they're owning a synthetic representation?

Bill Barhydt: So you're using Bitcoin to make a bet on the direction of the share movement. Now, right now we only support the long bet, which means you can only make the bet that it's going to go up. Eventually we'll support both directions. So you're basically saying, "here's $50 worth of Bitcoin. I'm making a bet to buy $50 worth of Apple shares, going up in price versus the sport price the moment I gave you the $50 worth of Bitcoin."

Peter McCormack: Are you also buying that share in the background?

Bill Barhydt: Okay, so now who is the counterparty in that transaction? Meaning who's taking the opposite bet? Today Abra is taking the opposite bet. Once we start allowing you to make bets in both directions, you'll be offsetting bets with other consumers. So now what we have to do, is we have to hedge away our risk on that bet. In Wall Street terminology, you would say, "we want to run a Delta neutral business, so that we're not using our balance sheet to take risk against the consumer."

So we hedge away that risk on the open market. Generally, the way you do that is the way a hedge fund would do something similar, which is to make a leveraged bet that would effectively take the opposite bet to eliminate the counterparty risk on the trade. That's what we do. So you're not actually taking balance sheet risk against Abra financially when you make that bet.

Legally you are, but we actually have hedged away that risk in more or less real time. So if you buy $5 worth of Apple, every few seconds or minutes, we're actually doing things which effectively buy those shares using borrowed funds, in a very simplistic explanation.

Peter McCormack: Okay, I think that's a very interesting product because firstly, Bitcoin is very natural to someone like myself. I'm kind of in a Bitcoin world. I think the opportunity to invest in companies without having to have some kind of brokerage account, which I don't really understand. I don't really want to have to think about territories.

I just think, like you said about Tesla, "I quite like Tesla. I think Tesla have got a positive future," or when you introduce the ability to short, I might be like, "hmm, I'm not so sure on Facebook's future." I would be interested in doing that. But just to be able to do that in a natural Bitcoin environment, I think is kind of where I think it would suit someone like me and I guess that's the market you're recognizing.

Bill Barhydt: Absolutely! There's two perspectives. The first is, why are we doing this? This is not an academic exercise. We believe that giving people access to the same type of investing services in Southeast Asia and in Russia and Turkey, that we have access to here in the States or you have access to in the UK, you actually have more options in the UK than we have in the US, because you have CFD markets and things like that. But giving people that fundamental access, to me is a right and Bitcoin is enabling this in a way that wasn't possible before.

It's very difficult to enable fractional share investing in the US, just by buying shares. You can do it, but it's hard. We've actually created a way where it's actually pretty easy. I could actually give you even fractions of pennies as an investment, because the way we create a Dollar or a Euro or a Yen, is no different than the way we create an Apple share or a Microsoft share. It's all the same thing, it's all Bitcoin based contracts.

So that's the other part of the equation. One, we think it's super interesting to democratize access to financial services because it's a big planet and most people don't have access to the breadth of services that we have access to here in the States. Two, it's one of the single best use cases for Bitcoin, just beyond digital gold that I've seen, if not the best beyond digital gold that I've seen, because I can basically give you synthetic access to any liquid asset in the world now using Bitcoin.

That doesn't mean that any liquid asset wouldn't have demand in our system. But what we've discovered, is that certainly fiat currencies, meaning the ability to store dollars in Argentina, where you don't have to put the dollars in a bank and have them confiscated, because basically you're using a non-custodial multisig wallet to do that, which is what our tech is, that's really interesting. But there are probably other liquid assets which aren't that interesting today.

So we've tried to focus the use cases on things that will actually work, because again, this is a business, it's not an academic exercise to prove that we can do this. So we've gone very deep in understanding what we think consumers want globally.

Peter McCormack: It's interesting because I was going to bring up the Argentina point. They are obviously having an inflation problem at the moment. Are you seeing a use case there where people are buying synthetic dollars as a store of value?

Bill Barhydt: Absolutely. We see it in Venezuela. We've had users in Venezuela who've bought Bitcoin, we don't know how they're getting it and have put that Bitcoin into an Abra wallet and converted it to dollars and are basically storing those dollars. Again, the Bitcoin is sitting in the wallet, it's just collateral for this contract. So they're now basically fully hedged in terms of US dollars with no bank.

Peter McCormack: Can they send dollars from wallet to wallet?

Bill Barhydt: They can. So in the Abra app, you can click on the hamburger menu, there's a send money function and any Abra wallet can receive. I can send Bitcoin, you can receive it as dollars. You can send dollars, I can receive it as Bitcoin. You can send Euros, I can receive it as Dollars. It's all just fungible smart contracts in our system.

Peter McCormack: Is everything still built on Bitcoin?

Bill Barhydt: 100%. now we have the ability to do this in Litecoin, which we built a couple of years ago when mining fees spiked. I think at one point... Because our multisig transactions are actually even bigger, because again they're multisig as opposed to one to one, so there was a point in 2017 when our system was completely un-optimized because we had just launched it and I think we were paying $25/$30 per transaction. So you could send $10 and it was costing me $25! So this is not a good business model.

Peter McCormack: You were swallowing it?

Bill Barhydt: We were at the time. We don't do that anymore for Bitcoin transactions, but we quickly "ported" this to support Litecoin and I say "ported" in air quotes because Litecoin and Bitcoin are more or less binary compatible when it comes to multisig scripts. So we don't really use it right now, but it's there should the shit hit the fan again and we have no choice.

But we've done a pretty good job of optimizing the contracts to keep the mining fees low and these transactions are mostly on chain. If you're doing transactions for yourself, just converting between currencies, there's some trickery we can do to keep stuff off chain. But by and large, if you go from one app to another, you're doing on chain transactions.

Peter McCormack: But if I send you $10 of a liquid asset...

Bill Barhydt: You've done an on-chain Bitcoin transaction.

Peter McCormack: Do I have a choice of which fee to pay?

Bill Barhydt: It depends. So if you're sending Bitcoin, you're paying a Bitcoin mining fee, period. If you're sending dollars, right now, we actually eat that fee, because it's too complicated for the average user to understand that they're actually paying a Bitcoin mining fee, when they're sending dollars. That's why we don't actually allow people to send shares, because there's no technical reason why I couldn't let you send Apple shares from your phone to my phone.

It is no different than sending dollars, it's all Bitcoin. The only reason we don't do it, is because one, the mining fees and two, people would have this mental block of understanding that they're actually moving Bitcoin around, when they're sending Apple shares. We actually don't want the average user to have to understand that they're sending Bitcoin around when they do that. So until we have a Lightning like network...

Peter McCormack: That was my next question!

Bill Barhydt: That we can write ride this one... So we built a quasi-Lightning like system that we're going to be deploying for people who are converting on their own phone between Apple and Microsoft and dollars, which allows us to keep those transactions off chain, because you're still holding your own collateral. We don't have that for person to person yet. As soon as we do, then we can let you share anything. I could literally say, "hey, send me $5 worth of Apple."

Peter McCormack: So can this be built on Lightning?

Bill Barhydt: It can because it's Bitcoin.

Peter McCormack: So you know I'm not technical, but does Lightning have its own smart contract or is this all built within...

Bill Barhydt: So Lightning is a multisig. We use the term smart contract, because it's a logical term that you're actually entering into a contract, but really Lightning are multisig wallets and that the channel basically use this multisig technology along with timestamps and other features of Bitcoin, to basically simulate what we call these channels. That's a perfect solution for Abra.

The issues with Lightning that we haven't figured out yet, one, are that we need a lot of basically Lightning nodes with a lot of money in them, to basically support the kind of transactions we're doing. Two, there's a lot of legal issues that, in my opinion, haven't been worked out yet, meaning are Lightning nodes money transmitters in the US or e-money license holders in Europe or the equivalent in China. I don't think anybody really knows yet.

Peter McCormack: You can't build this until you have clarity?

Bill Barhydt: We could probably test it in countries where there's, let's say a little bit more regulatory arbitrage. That's not happening in the US or in Europe. I mean those kind of old PayPal days, of ask for forgiveness, have sailed. That ship has sailed. So we would like the clarity, but I think it's going to take years.

Peter McCormack: So I also wanted to talk to you today about Libra. So I'm doing a week of shows, I'm going into New York today and meeting up with Jake Chervinsky and Preston Byrne to talk about the regulatory side. I'm in discussions trying to speak to a couple of people within Libra as well, but I thought it'd be good to have a kind of a broad conversation about Libra with someone.

So I'm going to tell you what my position is, because it's changed a lot and then I'd like to know yours as well. But when I first heard about it, I was like, "oh here we go! Facebook, the company that nobody trusts, that always lets us down, is creating a cryptocurrency and we shouldn't trust it because of financial surveillance and they're going to do lots of terrible things." Then I kind of sat with it for a while and thought about it. I thought, well, I still got a Facebook account. Despite everything, billions of people have still got Facebook accounts.

Bill Barhydt: And it's growing still.

Peter McCormack: In different markets.

Bill Barhydt: But the net is growing.

Peter McCormack: Yeah, so it's shrinking in the US?

Bill Barhydt: It's flat. I mean it's slightly down, but globally I looked at the numbers and what the numbers basically tell you, is that, does everybody really hate Facebook?

Peter McCormack: I think so.

Bill Barhydt: Exactly. I question the very premise. I think it's easy for politicians now, because they have fucked up as a company over and over again, but the average consumer doesn't understand why and how and what they've really done. Like the average consumer doesn't know what Cambridge Analytica is. There's this Netflix documentary is coming out this week and I guarantee you most people won't watch it. So it's just not understandable for the average person. Privacy is not an issue for the average person.

This is a huge problem for Abra. We run, in my opinion, the best Bitcoin wallet on the planet, your advertisers who I actually like, aside. But I know we do, because we've gone so deep in understanding how this should be done. But it's a non-custodial Bitcoin wallet, so you're holding the keys and I have no access. If the government comes to me to subpoena your Bitcoin keys, my answer is, "I don't have it. Here's his phone number, go talk to him."

That's the way it should be done. But the average consumer doesn't understand that, until they've been hacked. Once you've been hacked, your perspective completely changes. If you've been hacked on Facebook, your perspective on privacy completely changes.

Peter McCormack: Of course!

Bill Barhydt: But how many people have really been hacked, relative to the size of their user base? Rounded, very close to zero. But if you're one of those few dozen people or hundreds or thousands that have been hacked, you think it sucks. But that's not everybody and that's almost no one. So everybody who deals with either privacy or information security faces this challenge. It's not personal to you, until it's become a problem and then it's too late.

Peter McCormack: Yes, but also the other conversation I had the other day with somebody was, name me one of the biggest companies in the world, that hasn't had a scandal behind it? I mean Google came out with, "don't be evil", but they're white washing history in China. They chose to do business with China and they chose to whitewash history, which to me, that is evil. So you will struggle to find companies anywhere that haven't fucked up in one way or another.

Bill Barhydt: By the way, I do agree with you that that's evil, but you could also make the case, and I'm not making the case, I'm just giving you a different perspective, that what evil is, is relevant to the culture that you're doing business in. So now that's a cop out from a lot of people's perspective and I'm not making that case. I'm just saying that from a Chinese perspective, you could make the case that "hey, that's not evil because that's the cultural norm in China right now."

I think that's nonsense. But I do hear that from a lot of people. It's like, "don't give me the American perspective on what evil is, because what it is to you, isn't what it is to me" and okay, I get that. But I do think that, while the idea of rights is made up, I do think that it's pretty obvious what some certain basic rights should be.

Peter McCormack: But I'll almost guarantee anyone, I don't know who made the decision, whether it was Eric Schmidt, Larry Page, whoever made the decision, I don't know. I think almost anyone in the same position, probably would have made the same decision. They said, "well, is that all, we don't do business in China?" I understand it. I understand people make mistakes. Do I think Facebook made some huge mistakes? Of course, but at the same time, I'm just going to be practical.

People are still going to use Facebook. They're releasing a currency. Am I going to look at Libra and go, "I'm not going to go and touch that because Facebook's evil." Well, I've got a Facebook account, what would I even use Libra for? Perhaps Bill if we went for dinner and we both had a Libra account and the easiest way was to settle, was Libra, yeah fine. Do I care? No. Have I got anything to hide there, no.

Bill Barhydt: Okay, so let's break it down. Why is Facebook doing what they're doing? Why did they take the approach they're taking and what could they have done differently? So I spent the better part of the last 15 years working in developing markets on the ground, dealing with financial inclusion issues, remittance issues, microlending, so I've seen firsthand what it's like after the earthquake in Haiti to try to send $100 from Miami, a few hundred miles away and not have the money to be able to get there, because the cash outlets were under rubble. 

So I think that the people at Facebook, and I've spent a lot of time with them on this, are really interested in this remittance use case in general, for Facebook. Now, I'm not talking about crypto. I'm talking about for Facebook. The reason that this topic is so interesting to everyone, is not because they've developed this amazing new cryptocurrency technology. It's because WhatsApp has like 1.2 billion users. If they didn't, nobody would give a shit. That's why this whole topic is interesting.

What can Facebook do to make WhatsApp and Messenger, maybe even Instagram and the Facebook app itself, useful from a transactional perspective, knowing that they have billions of users. Same discussions we had with, you probably don't remember this, but with Microsoft in the late 90s, when they bought Passport and Hotmail and tried to launch this HailStorm thing and everybody lost their mind. It's the same thing happening now with Libra. We'll come back to that in a few minutes back, as I actually do want to make that parallel, because a lot of your audience actually probably doesn't know the story of what Bill Gates tried to do.

It's really a parallel to hear what's happening, but I think that Facebook's hearts are in a better place, at least the team that's working on it because I know them and I believe this. I think that when the original team started this, they were super interested in this idea of, "can I do money transfer", ironically, between the US and India of all places, given the narrative around India, right now. But again, it wasn't about crypto. It was about, how do I use WhatsApp to do remittances between the US and India.

Now, if you want to do a remittance from the average consumer's perspective, you have to be able to create a user experience that's better than what they have today and user experience comes down to a few things. One, who am I trusting to hand the cash to, if it's a cash remittance. Western Union has hundreds of thousands of windows, people think they're universally hated and that's mostly nonsense.

People actually are happy to use Western Union for the most part because they trust that the money's going to get where it's supposed to go, independent of the fee. Yes, if they had a choice, they would lower the fee from $15/$20 to zero. But more importantly, they're trusting that the money's going to get where it's going and they've been at this for decades. So there's a reason why they have that trust.

So you have to be able to do better than that. They support the ability to send money via bank accounts and receive it in cash, send money in cash and receive it in a bank account or any combination of that, with lots of different user interfaces that they own and user interfaces that their partner's own. And the multiple on their stock is shit. So not only is it a business that's been optimized over decades, financially the markets don't actually believe it's a very good business, or at least doesn't have very good growth potential.

Peter McCormack: Or there's a lot of potential threat?

Bill Barhydt: Exactly, that's the other part. Now there are a lot of people like Remitly who just announced a big financial raise, I think of a couple hundred million, that have raised an insane amount of money. The other piece of this is cross border commerce, which is kind of a variant on remittances, meaning you're not going from person to person, you're going from person to merchant. So then the third part, which is actually paying remote workers, which is actually merchant to person. Let's focus on cross border commerce.

So if you are in Latin America, like MercadoLibre, who's one of the founding members of the Libra association, your credit card fees are 2x at least, what we pay in the West as a merchant. If you go to the average US/UK merchant, independent of the regulatory piece, if you normalize that in general, a Latin American merchant is paying at least 2x for online card not present transactions, 2x what I would pay if I started an eCommerce site tomorrow here in Mountain View. That's crazy!

Now there's a reason for that. I say it's crazy, but it's also a function of fraud risk, which is why the fees are what they are. So how can you lower those fees? Well the only way you can really do it is by eliminating the chargeback risk and the idea of a cryptocurrency is that if it's a bearer instrument from a settlement perspective, that's interesting. That was the promise of Bitcoin, is that it deals with the remittance issue and it also deals with the chargeback issue.

Now let's come back to Bitcoin. If you want to build a remittance system and you want to build a cross border commerce system and you have 1.2 billion users today, what would happen if Facebook said, "okay, we're going to build, let's even call it an Abra like system", because I understand what Abra does or let's reverse it. What if for some bizarre reason tomorrow Abra got 100 million or 200 million new users in one day, what would happen to Bitcoin?

Peter McCormack: Price would rally.

Bill Barhydt: The price would rally sure, but what would happen to on chain transactions? The fees would skyrocket to the point where doing anything with Bitcoin that was transactional, was effectively untenable. Facebook knows this. These are smart people. They've looked at this, they've looked at Lightning, they've looked at Bitcoin, they've thought this through.

They came to the conclusion that Bitcoin is not optimized correctly, so to be a payment network. Bitcoin is optimized to be digital cash right now, again that ship has sailed. We all know that that's where Bitcoin is going. We also know that the promise of Lightning to make Bitcoin scale over the next 5, 10, 15, 20 years is awesome. I believe in it, I think it's got great promise, I love the fact that there's multiple competing companies working on it, but it's not scalably real yet.

That's a phrase. Facebook needs something that will work for the 1.2 billion WhatsApp users, the X billion Messenger users, the X billion Instagram users, all as one big network. So they had to build, at least in their minds, a system that was payment friendly and scalable today and just didn't have the promise of scalability. So I think ideally based on my discussions, they actually would have preferred to use Bitcoin.

Peter McCormack: Interesting.

Bill Barhydt: That's my opinion and I'm pretty sure that I'm right given the discussions that I've had, at least with a few people. I can't speak for the whole company. I'm actually not even speaking for the company, but I can speak for some of the kind of, wink, wink things I've seen from them. I think there's a huge belief in the Bitcoin model, but I also think there was recognition that, given the problems, the explicit problems they're trying to solve, there was no way that Bitcoin was going to work for them for this and I get that. I actually agree with that statement.

Peter McCormack: Yeah, I agree. I completely agree.

Bill Barhydt: And so then the question is, "well, what do we do? We could basically rebuild PayPal", which is effectively a big database system, which has on top of that, a regulatory layer in every country. I believe PayPal allows you to do cash in and cash out in something like 25 countries. Most of that is Europe, because you get support in a whole bunch of countries plus the US. Well that sucks. PayPal has been at this for decades and they can only do cash in and cash out of the PayPal wallet in a couple of dozen countries.

That's not great and Marcus knows this better than anyone because he used to run PayPal. So how do you build a solution that scales to those numbers, supports cash in and cash out everywhere, is integratable with these apps and then you can start having a compliance and regulatory discussion, which doesn't all of a sudden, reap the ire of every politician and regulator in the world. It turns out that maybe that's not even a realistic goal and you've just got to take it and deal with it and actually has a viable user experience for the consumer at the same time.

So that's the framework for the challenge. So I think when you look at it from that perspective, the decisions they've made actually start to make sense. So what they've done in my opinion is, is they've cleverly separated out the ability for Facebook itself to manage people's "money", from the actual management of the float and they've done it in a way where they're not actually creating a whole new currency. You could actually make the case that it's not a currency, it's just an index of other currencies.

I'm not going to use the legal terminology now, we'll just simplify it. We can get into the nuances of whether it's a security and other things, but effectively it's an index which is a basket of other things and effectively as currencies come and go or change in value, their representation within that index will change proportionally, which is what an index is.

That's no different from an ERC-20 token in the Ethereum world, which allows you to basically create a representation of something which is stored somewhere else and then move that ERC-20 token around as a bearer instrument, which in theory could solve the double spend problem as well as the chargeback issue I mentioned before, as well as the remittance use case I mentioned earlier, because those are the use cases that we're going after here. 

So if you have a bearer instrument that represents an index, you've gone a long way to solving a couple of problems. I don't have to educate my public on what a new currency is. I do a little bit because it's not dollars, but it's pretty close.

Peter McCormack: But we've seen the screenshots as well. So your Libra value is also represented in your local currency?

Bill Barhydt: Correct and that's easy to do.

Peter McCormack: So sorry, before we carry on, just a quick question. Why not just a dollar stable coin?

Bill Barhydt: Because who gets to win in that discussion? Meaning if you're trying to do cross border commerce across the whole planet, why dollars? Why? Why not renminbi? Why not rupees? Why not rupiah in Indonesia? So I think that the perspective of, "we're going to create a level playing field for all of this", I think is actually very clever and it gives something very unique back to the planet to say, "hey, why should it be dollars?"

Peter McCormack: I guess the reason why I thought that they would go with dollars, is that the dollar is still a global currency. If you asked me and if you said $100 I'm like, "okay, I think that's about £80, £90 pounds." Give me any other currency, I can't do the same. I know with the dollar better than the euro and I think most people know their dollar conversion.

Bill Barhydt: I think what's going to happen is most people are going to use it mentally as a one-to-one and look in their app and see their pound balance or their yen balance and the volatility is going to be so low because of the way it's weighted, that they're not going to realize that the balance may be fluctuating by a few pennies every day or every few hours. People will just get on with their day and if this does work and they're using Libra, they're simply going to see it as euros or whatever their local currency is and just get on with their day.

That's the difference between this model and Bitcoin, because if people are reconciling in their head or reconciling in their head in fiat, then obviously the balance is going to change dramatically, because we're still in this high volatility period of crypto because of the fact that we're introducing a deflationary asset still. Introducing Libra is not creating a deflationary asset, it's just an index of existing currencies, that by definition is going to have low volatility.

So I don't think that's a huge deal. The other way you could've done this, is you could have created lots of individual tokens like the TrueUSD model, where TrueUSD is creating... I think they have TrueUSD and TrueEURO. That could have worked. But I think that if this works, it's definitely a more clever, elegant solution, which actually does create a level playing field. So now you basically have this idea that we can separate out the management of the asset, meaning the wallet, from the actual creation of the index and I think putting it in Switzerland is an okay solution.

I mean you could have put it in the US, but I don't know that it really matters that much because there's so much regulatory overhead no matter how you slice this up. Switzerland seems just as good a place as any to actually put the foundation. I think from a foundation oversight perspective, Switzerland seems like a pretty good place to do that. We've looked at it for the Oracle part of our business and things like that, so that's fine. Now you get into the complicated part of this, which is, what does it mean to be a founding member of this association? Is it really a cryptocurrency?

Is there a Blockchain here? What does it mean, they refer to it as a BFT or Byzantine fault tolerance system, is that really true? Why does all this matter? So I'll give you the answer first and then come back to it. I actually look at this as a multi-year beta test. They're calling it a "permission Blockchain". My opinion is that there's almost no such thing. It's either a private database or it's not. I'm being a little...

Peter McCormack: I know exactly what you're getting at.

Bill Barhydt: That's fine and I don't necessarily have a problem with the approach they're taking, I think it's important that people understand what they're getting. I think for the next few years, and I don't think Facebook had a choice with this, and I also think it was important that they announced it early, which I'll come back to. So I think that this is effectively a private database for a while, and I think it needs to be, because the chance for them to screw this up is pretty high.

So the only reason it didn't matter in Bitcoin, was because when Bitcoin only had one miner, nobody knew who it was. When Facebook launches this, everybody's going to know, or when Libra launches this, everybody's going to know who it is and it's not just going to be one individual with a laptop mining the Genesis block, which is what Bitcoin had.

You could have a simple consensus with a party of one, to modify Bitcoin transactions 10 years ago, that was actually quite doable, because it was just Satoshi and then eventually it was Satoshi and Hal and obviously it grew exponentially, but you could make those changes in the early days. So to say that Bitcoin never had that, is bullshit.

Peter McCormack: Of course.

Bill Barhydt: So I think that what Facebook and Libra are going to have to do, is basically say, "okay, how do we go from this permissioned system, to a Bitcoin permission-less system, so that it really does become a public Blockchain." Now, I think that's a 5 to 10 year undertaking from where they are today, because they actually released effectively a prototype last week. So when they say they released beta code, it's not beta code, it's prototype and that's fine.

Again, I think they had no choice but to announce it earlier, because they knew the political firestone was coming at them and they had to deal with that political firestorm. Better to deal with it before you're production ready, than when you're production ready and then have to deal with the embarrassment of not being able to launch.

Peter McCormack: And I've got to just throw in there, I pretty much watched the entire six and a half hours that Dave Marcus fielded, both in front of the Senate and the House and I thought he did a bloody amazing job.

Bill Barhydt: He really did! He was well coached, he was ready, he's well spoken. One thing missing was Amal Clooney, by the way.

Peter McCormack: What's that?

Bill Barhydt: We've been joking here that he is a George Clooney look alike! So that when they make the movie, it's going to be George Clooney!

Peter McCormack: Well he took a lot of tough questions, relentless tough questions, repeating the same tough questions over and over again for mistakes that weren't even his fault, for parts of the business what he didn't control.

Bill Barhydt: He knew that was coming.

Peter McCormack: Of course, but I actually thought one of the most impressive things, was with how much grace and composure he spoke with. I mean in front of the House, he was there for four and a half hours and he was dealing with a combination of educated, uneducated in Bitcoin people, but also people with good perspectives and bad perspectives. I was really impressed.

Bill Barhydt: I was very impressed with his composure, how he handled himself. I was a little dejected with the democratic side of the House on some of the ridiculous questions they asked. I was a little more impressed with the Senate, actually pleasantly surprised with some of the questions. But again, all in all, I think he did a fantastic job under very difficult circumstances, because the narrative was always going to be about "Facebook's a fuck up, why should we trust you?"

Peter McCormack: And that's the thing. We talk about trust and I think it was Alex Gladstein who made the point yesterday when I was with him, and hopefully he'll correct me if I'm wrong, but if we think of three types of money, we've got Bitcoin fully decentralized, we've got corporate private money, say Facebook, and then we've got government money. I personally trust corporate private money by Facebook, more than I trust government money.

And the reason being is that if Facebook get this wrong, I have an opt out. I don't really have an opt out with the government. If the government make mistakes, all that happens is I have a democratic vote, but nothing changes and they all fully aware of the lens which is on them. I actually believe the structure they're putting together, in terms of government is great, because it is kind of binary. You either create Bitcoin and fully decentralize, or you have some kind of permissioned Blockchain.

Bill Barhydt: That's right and I think this is a good time for that to be happening for all the reasons you're alluding to. I think that there's going to be a lens on them, for everything they do. They can't hide anything at this point and every regulator in the world is having the same discussions, to some degree, that we're having right now that others have had. Everyone. I've gotten calls from people who've said, "can you talk to the central bank in country X?" I would get out my map and look where country X is.

So everyone is talking about this! Kudos to them, but again, that's the power of having billions of people. If you're a regulator in that country interested in this topic, you are using WhatsApp, so you get it probably more than the average American does, who is not using that particular app. Okay, so now let's go back to why they took this approach. So now you have basically this kind of technology solution that you can't make fully permission-less out of the gate, for lots of political reasons, legal reasons, technology reasons, whatever.

So how do you go from what you're announcing, to being, let's call it a scalable Bitcoin, which is really where I think they were at mentally, when they first started looking at this. I'm mostly guessing, but I also kind of know, because I've talked to them. So I think that over multiple years, what's going to happen is that the technology will get better, the way that they add members will accelerate, it's going to be very difficult for anyone to get in and I guarantee you they're having all kinds of discussions with other companies who are saying, "hey, why wasn't I included?"

Or "how do I become a member? What's the fee? I'll pay you $20 million", whatever, because they don't have a "Blockchain strategy." This is exactly what we went through in the dot-com days when people said, "hey, I'll pay Netscape $5 million!" We used to collect money from people to be part of the dot-com strategy, it's crazy! The same thing is happening here and so they'll figure that out, but it's going to take multiple years.

So I think what happens is, is you lose that beta moniker as soon as you flip the switch, in my mind, to say it's no longer permissioned and it truly is a public Blockchain. To me the difference is the off switch. As soon as you lose the off switch, meaning I know who to pick up the phone and call to turn it off, that's when it goes from being beta, a better Oracle, to a real Bitcoin-like decentralized system that could potentially scale depending upon how their technology unfolds over time. But I think that's a multi year undertaking, if not a 10 year undertaking.

Peter McCormack: If they achieve that, do you think there's any way we get people away from the fear and the kind of hate towards it and actually have almost like a secondary sister cryptocurrency to Bitcoin that actually offers a beneficial utility to...

Bill Barhydt: If what I'm saying happens and they're successful doing it, that'll happen by default and you won't even know it. I mean, the parallels to the internet itself, and this is true for Bitcoin, are astounding. So I lived through this in my Netscape days, when you had to install... I use this analogy all the time. In 1993 you had to install TCP/IP on a Windows laptop to use the internet. Most of your audience wouldn't understand what I just said.

Peter McCormack: Nope!

Bill Barhydt: That's how we've evolved in terms of using the internet. It just happened! We turn it on our iPhone the first time, it makes an internet connection and we just go about our day or Android phone whatever, that's going to happen with the use of cryptocurrency for doing online transactions, person to person, person to merchant, and we won't even know it. It'll just smoothly happen if it's successful over time, with in the early days as we're seeing, a lot of stops and starts and issues with scalability, just like we had with the internet.

We'll quickly evolve to be something, where the technology is hidden to the average user, it's readily usable, it looks like dollars or even if we have to learn a Libra or a Bitcoin currency, it functions from a transactional perspective like what we're used to.

Peter McCormack: Okay, why do you think this will eliminate chargebacks? Because I would've thought chargebacks are really a regulatory requirement.

Bill Barhydt: They can be. So there's two perspectives on that. There's the cash perspective, which says if I hand you cash, the idea of a chargeback is now a contractual issue between the two of us. That's what chargebacks evolve into in theory, in a correctly executed Bitcoin and to a potentially Libra model. Now out of the gate, that's not what Libra is, because Libra can do rollbacks. Again, anytime you can have a board meeting, with the named group of people and make a decision, by definition you can and will have rollbacks.

I guarantee you that at some point over the first two years of that system being live, there's going to be some decision to roll back a transaction. It's going to happen. But eventually you want to get to the point where the rollback is actually executed, what I would call out of band. Meaning it's not happening on a Blockchain, because somebody is storing keys offline and doing offline settlement and not actually doing on chain settlement. So Calibra, which is their wallet system, they're going to be storing, the stored value in their database, not with you holding private keys.

That means from a Calibra perspective, they can execute rollbacks anytime they want, because they're maintaining a separate database with everybody's balances in it. So that's different than doing on chain settlement from a Libra perspective, which once it goes from Bill's beta definition of Libra, to a public non-beta definition, which could take 5 to 10 years, then rollbacks should not be possible.

That would be part of my definition of now being out of beta. It's quasi Bitcoin like in that it's decentralized enough so that there's no off switch, no rollbacks, no potential for double spend etc, but still uses the integration with the physical world to have the basket of currencies.

Peter McCormack: So rather than a chargeback, it actually becomes a relationship between the consumer and the retailer?

Bill Barhydt: Correct and it's a contractual issue issue, not a technical currency issue.

Peter McCormack: And that will come down to probably consumer protection regulations per market?

Bill Barhydt: Exactly, it's no different than we have today. You have chargeback rights even if you pay with cash. But those chargeback rights can't be implemented in the physical paper itself. It's a legal issue between you and the merchant. Whether you pay at Starbucks or you go online to Amazon, you have rights. The rights are country to country specific.

Peter McCormack: So why do you think Facebook's doing this, because obviously one of the things they've talked about is that they want to facilitate better remittance, make it easy for people to send money with lower fees instantly etc, but also they've talked about supporting the Facebook ecosystem of retailers and making it easier for sale. Almost certainly in the Instagram environment, this is going to work really well. I have fears for their primary Facebook platform, but they've done it in a way where they won't see all the benefits from the success of Libra.

Bill Barhydt: Absolutely. So I think I have three perspectives on this and the third one relates back to what I said I wanted to talk about, which was that Bill Gates, Microsoft HailStorm story from years ago. That's kind of the last piece. So I think the first part is, there's a really strong interest and there has been since the get go, when they bought WhatsApp, to add transactional capabilities to their messaging systems and they've been looking for the right way to do that. They've tested different things over time.

There is a domestic money transfer capability inside of, I believe it's still their Facebook Messenger for Americans today, to have a cash like solution to send money from person to person. I'm guessing nobody even knows it's there, because it was integrated in a way where unless you were looking for it, you wouldn't find it. So that's part of the challenge here by the way. The user experience has to be integrated in a way where it looks like the app was designed to do this, not like an afterthought.

That's been a big problem for all the companies that have tried to add transactional capabilities to messaging, it's always been an afterthought, with the exception of WeChat that did it right, relative to the Chinese culture. So I think that there's always been a strong interest in adding transactional capabilities to messaging, because there's this belief that that's what a lot of users want and I think WeChat proved that that's true for some subset of people.

It's just that they can only do it domestically because of the way WePay works. So they're in a unique position if they can solve the technology and legal issues to do it cross border. So that's number one. Number two, I think Facebook has a longterm business strategy problem. They generate a very small amount of revenue per user and as they scale outside the US faster or outside the West faster than they're scaling in the West, that's actually going to get worse.

Peter McCormack: Yes, of course.

Bill Barhydt: So the best chance they have, in my opinion, of fixing that is transactional revenue.

Peter McCormack: Yes, because the ad model is breaking in that they have pushed it to its limit.

Bill Barhydt: That's my point, 100%.

Peter McCormack: It was a very clever thing they did, but they just tweaked, tweaked, tweaked to give the stock market constant growth. I mean they could have shot the ads up higher. Also, the ads don't entirely work very well for certain markets and it's hard to prove. So I used to work in advertising and some of the measurements were wrong. I mean certainly in the early days, when they first had video, it was an autoplay video, but they gave that as an incremental view. So they've got a problem there. Also, I think the Facebook novelty has worn off.

Bill Barhydt: Yeah and Wall Street analysts have talked about this, is that large global fragmented audiences are risky plays if you're selling advertising because you don't have one stop shopping. I mean you can look at Google's numbers and see this play out as well. I mean Google has users in every single country in the world and I believe they sell ads in every non-sanction country in the world. They have this challenge and so it's not like there's no basis for understanding this challenge. Facebook gets it and they know that they're going to have to do something in that regard.

So the second issue I think really is, how do we basically deal with the fact that we're going to be diluted in terms of user growth versus per user ad spending over time, especially if the growth is in developing markets and outside the West. Okay that's number two. Number three has to do with this whole identity play. So Facebook Connect owned identity on the web for a few years. That's not true anymore. Every site uses Google. Apple now with their most recent OS release has now announced that they're mandating for anybody who uses other third party identity schemes, that they must use Apple's new identity scheme as well.

Peter McCormack: I'm quite excited about Apple's identity scheme.

Bill Barhydt: I like the approach they're taking. I don't like the mandate, but I get it. I mean Apple has a very kind of unique perspective on user experience versus how they want the world to work and how they control their app store. So I do like the technology approach that they're taking, at least in terms of what they announced. I haven't dug into how the code works and all that, but it is interesting. Now let's come back to this whole HailStorm thing now. I don't know how old you are, but if you remember in the late 90s...

Peter McCormack: 40!

Bill Barhydt: Okay, so you may not remember in the late 90s, Microsoft bought Hotmail. Now they had a login scheme that was integrated across different web properties, which was called Passport, which was your Hotmail login.

Peter McCormack: I remember that it was a little raised button with the...

Bill Barhydt: Correct, that was basically your Hotmail login, translated to be an identity that you could use on different web pages. It was reasonably successful. It wasn't a big focus of the company, but Bill Gates wanted it to become a big focus and he had this idea, that Microsoft was going to build this system which could add transactional capabilities to any website that used this new project called HailStorm, which was effectively your Passport wallet, which was Hotmail, integrate into this new global wallet, which was going to be integrated into everything and it was called HailStorm.

You would be able to do micro transactions to read a webpage, you'd be able to check out, you'd be able to send money, all of it with effectively a toll bridge to Microsoft. That was the initial reaction, which was, "oh my fucking God. Bill Gates has got his hand out to basically take a piece of everything that happens on the internet." The entire planet lost its mind, collectively within hours of this announcement and Microsoft basically had no choice but to cancel the project within months of the announcement, because the pushback from the public was so severe...

Peter McCormack: Was it rational?

Bill Barhydt: I don't know. Look, it's software and it's technology, use it or don't use it. Probably not from a, we're giving the internet to Bill Gates perspective, because at the end of the day, there is choice, I mean he's not a dictator. So now on the other hand, when Facebook launched Facebook Connect a few years ago, everybody just started using it and nobody cared. We basically handed identity over to Zuckerberg on a silver platter. Again, choice.

He didn't force us to use that, he just made it so easy and so simple that everybody used it. We never questioned how it worked from a technology security or privacy perspective. Most web developers probably have no idea how Facebook Connect works in terms of privacy and security. So he had a backdoor there, which he had a big head start on, which he still does. I mean, it's unbelievable how many websites use Facebook Connect and so they get the value of identity for stickiness.

There's a lot of people that even if they don't use Facebook every day, are not going to get rid of their Facebook account, because they use it to log into dozens of websites. That's a big deal. If he has the same thing integrated into your wallet, which is what Gates was trying to do with HailStorm, Facebook isn't going anywhere for those users, even if they don't use a newsfeed. So now this whole kind of transactionality and transactionality could also mean logging in, not just paying.

So you have the ability to log in, your ability to pay, your ability to send, your ability to track other assets, your movie tickets, whatever ultimately may be digitized inside that Calibra wallet, becomes an identity play over time. It's just so ironic to me that when I saw this play out with Gates and everybody lost their mind, the only people that had been losing their mind with the Calibra/Libra announcement so far, have been politicians and a little bit of media, but because they get on the bandwagon and they don't know what else to talk about.

So I think that Facebook has an infinitely better chance of executing on this, than any other company I've ever seen. Particularly the Microsoft announcement, which was the closest thing that I saw to this, which was over 20 years ago.

Peter McCormack: Do you think they will launch Libra?

Bill Barhydt: I do. I think that they're going to have an issue launching it globally with universal access on day one for a few different reasons. Just because you're launching a currency doesn't mean you can get access to it. The biggest challenge for Calibra usability in the short term, is going to be the in and out rails. Meaning how do I get my money into the Calibra wallet and out of the Calibra wallet in my country.

Peter McCormack: And they are essentially outsourcing that, to potentially people like yourself because they want to get away from the KYC/AML parts. They're kind of offset risk.

Bill Barhydt: I don't think they want to. I think Libra wants to own that globally and I think they're having discussions with the retailers that control cash payment all over the world to do that. But I don't think it's realistic for them to have all of that in the next couple of years.

Peter McCormack: I don't know if you saw the article Eric Wall wrote about this, but he said it essentially exploits a regulatory loophole by offsetting the KYC/AML to the on and off ramps.

Bill Barhydt: Well, it's country specific. So Libra itself doesn't have that issue, but Calibra would in most markets. So for example, in the US in order to facilitate in and out, they're going to have to be a money transmitter at a minimum, or a bank or a bank trust or some variant of the three of those and any money license holder in Europe and there's equivalence all over the world.

There's no getting around that and that's where the regulators have the most influence and can have the most influence on what Calibra or Facebook would be able to do, and that's the biggest issue with launch. So when you say launch to me, yes, you can create an index, they could probably do that within six months, if that's all they cared about. But that's not useful. It's only useful if it's integrated into WhatsApp and I can get my money into WhatsApp and I can get my money out of WhatsApp.

I'm not even thinking about it in terms of, should Facebook be holding the keys or not? I'm just assuming that the average user doesn't care, put that aside for a second. If I'm doing it architecturally the way they're talking about, I need to get my money in and out and if I can't do that in a way that's better than Western Union, I'm not going to use it.

Peter McCormack: My assumption here is that Coinbase are working very closely with them, being one of the founding partners. It seems a very natural fit for them as well.

Bill Barhydt: Well, I don't know because Coinbase is a very trader-like perspective. If you look at all of the large trading sites, Coinbase, Kraken, Gemini, that are in the West, they have mediocre user experiences for getting money in and out of the system because they're focused on a trader user experience.

Peter McCormack: I see Coinbase different. I've always felt, and I don't know if the US is different from the UK and especially since they did their PayPal integration, I actually think getting money in and out of Coinbase is really easy.

Bill Barhydt: Yeah, they just turned off the faster pay connectivity. They announced it a few weeks ago, as I think they had a bank issue in the UK. So you actually can't use your UK bank anymore to get money in and out.

Peter McCormack: I think I haven't seen that because I obviously I'll use Kraken now.

Bill Barhydt: But I think by and large, most of them use bank wires to get money in and out and paying $15 to get money into your trading account, when you're trying to be a better Western Union, is a nonstarter. It effectively has to be around [Inaudible] to get money in and out, with a really good user experience, if you're going to be better than Western union.

Peter McCormack: How do you think they're going to solve that?

Bill Barhydt: I don't know. So I think here's the problem. If any large country has a domestic person to person wallet for money transfer that is successful, you have it in the US with Venmo, you have it in China with WePay, you have it in Mexico with Transfer, you have it in Africa with M-Pesa, what you don't have is cross border. Except you have Western Union, you have MoneyGram, you have Remitly, you have Zoom, which is part of PayPal now and so you have to be better than that if you're going to get usage or you have to solve a problem locally, that they don't solve.

Well, you can't launch globally because of the problem challenges we just discussed. So by definition, you're only launching in a subset of countries. Well, what value do you add in a subset of countries versus what's out there today? That is a big problem. The biggest value you add is you could integrate into WhatsApp. But if you do it in a way that it's hard to get the money in and out, nobody's going to use it! They're not going to do it. So this is a huge challenge.

Peter McCormack: Do you think this is their biggest hurdle?

Bill Barhydt: 100%, I talk about this all the time. The single biggest challenge for Facebook in making this work, is having a user experience for getting money in and out of the app that's better than what's available today and is useful for people in the countries that matter out of the gate.

Peter McCormack: It feels like overall though you are pro Libra?

Bill Barhydt: I'm not scared of it at all. I mean Abra is going to support Libra as in the currency, that's fine and will be the non-custodial go-to choice I hope if it's successful and I'm pro them doing this because I want the innovation. I want people to be trying different things. I don't want just another PayPal out there and I want the promise of Bitcoin, but also applied to payments to work today and I'm not a patient person. I want it now.

I am patient in terms of Bitcoin working correctly, but I am a little bit skeptical that it's going to happen quickly. Meaning I think that to get Libra to work right, both from a technology perspective, the cash in and out rails, the legal compliance, political perspective, I think it's going to take a long time.

Peter McCormack: So the summary of my view is that I understand all the hate and the pessimism and the negativity, it's only natural. But overall, I believe Libra will make Bitcoin stronger and Bitcoin better. I think it will be a sister support currency. I think it will bring people into the Bitcoin ecosystem.

I can see it definitely in some ways a better medium of exchange than Bitcoin. I think too often Bitcoiners just kick the volatility can down the road and says that it's not going to be so volatile in the future, that's a real problem. If they can get to a truly permissionless position where we can trust it, then great. But yeah, I'm supportive.

Bill Barhydt: Totally agree with all of that and I think the only question, is how long is all that going to take? In terms of the narrative around it helping Bitcoin, that's already happened in the last few weeks. We've had so many new people talking about Bitcoin that weren't talking about it before; users, politicians, banks, it's awesome! And it's just early days. So I think we're going to see more and more of that, but it will be interesting to see how long it takes for this all to play out.

Peter McCormack: All right, well this is excellent. I've got to go and get a flight to New York now and interestingly, I've got 36 seconds left until my memory card is full. So you've got about 30 seconds now to tell people how to follow Abra and follow yourself.

Bill Barhydt: Just go to abra.com. You can download the app or app and start buying a Bitcoin today or you can follow us on Twitter at @abraglobal. I'm also on Twitter at @billbarhydt.

Peter McCormack: Great, thanks for coming on again Bill!

Bill Barhydt: Always a pleasure!