The significance of this development should not be understated. However, it was lost to the Litecoin community because many are not familiar with how Abra works exactly. To be honest, I didn't either! So I started reading up on their website www.abra.com and was completely blown away by what I found.

The Basics

In order to understand the significance Abra's announcement for Litecoin, we must first understand how Abra works. Here are the basics:

Non-custodial and decentralized exchange Multi-Sig Smart contracts Synthetic currencies

Decentralized Exchange

Abra is a non-custodial decentralized exchange. That means they don't own your private keys or hold your coins. When you log into the app, they give you seedkeys which you MUST write down. This is the first half of the 2-2 multisig that you create. In other words, you co-own the address that you deposit your Litecoin into.

MultiSig

Abra is the 2nd partner of the 2-2 multisig. When you deposit LTC and trade for a coin, you sign your 1/2 of the transaction to Abra. Your LTC is then locked into the wallet. This method of trading ensures that you still hold the private keys in your mobile wallet. Unlike centralized exchanges like Coinbase, Abra doesn't own possessions and is not a custodian of your Litecoin.

Smart contract

When you trade for a cryptocurrency, your LTC purchases a specific number of coins via a smart contract. When you cash out, they sign their half of the transaction to receive the LTC you sent and then pay you out your gains or your losses. If the cryptocurrency you bought grew in price, Abra will cover the spread by sending you the total amount of Litecoin the cryptocurrency is worth.

Synthetic CryptoCurrencies

Here's the slightly confusing part. Abra has made it possible to trade without actually owning many of the cryptocurrencies on their platform. If you buy LTC on Abra, you're not actually buying LTC. Instead, your buying a representation of LTC. They call this a "synthetic currency" and it only exists in their platform.

The unique attribute of this synthetic currency is that it follows the price of the respective coin on other exchanges. So the LTC synthetic currency will follow the aggregated price of Litecoin on exchanges. If LTC goes up in value, you can cash out and they will pay you the LTC you are owed.

synthetic Fiat Currencies

They've also created synthetic currencies for various fiat as well. This is the most interesting part for me because it rightfully leverages government and global economies in a similar way derivative markets do. You may not realize it, but different fiat currencies actually fluctuate in value comparatively to other fiat currencies. If you buy a synthetic fiat currency, you are hoping that the economies that support that currency will do well.

Why This is a Big Deal for Litecoin

There are currently 3 on-ramps to Abra: 1. Bitcoin 2. USD 3. PHP.

That means you must have one of these three currencies to trade on their exchange. However, the Abra team wanted to add another blockchain to extend their exchange protocol on to. After thorough research and investigation, they chose Litecoin: