In a groundbreaking move, Robinhood today deployed tokenized stock trading on its new Ethereum-compatible layer-2 platform, Robinhood Chain. The announcement of Robinhood Chain coincided with the opening of EthCC conference. This new initiative is a big step on the road to bridging traditional finance with the technology behind blockchain.
Robinhood Chain, which was created with Arbitrum Orbit, allows users to self-custody tokenized stocks. Additionally, it powers the ability to trade directly through different DeFi applications right from their wallet. Under the leadership of their co-founder and CEO, Vlad Tenev, Robinhood is equally focused on continuing to disrupt traditional finance systems and turning them into efficient, blockchain-based solutions.
The architecture of Robinhood Chain is identical to other rollup models, but unlike other rollups, Robinhood will have full control over its sequencer. The direct control over the platform enables the firm to monopolize all transaction fees earned on such a platform. Robinhood intends to deliver a fully customizable and programmable trading experience. Currently, they provide 24/5 access with hopes of increasing their capacity to 24/7 access later on.
This move into tokenized trading takes advantage of continuous trading functionality and expands access to the larger market. With this move, Robinhood is now giving traders the ability to trade all the U.S. stocks on DeFi platforms. Their user base is impressive, claiming 25.9 million funded accounts and a $563 billion dollar trading volume.
Robinhood’s dangerous model means the company can monetize every layer of the trading stack, from offchain trading to onchain utility. Even more worrisome, the 24-hour trading model opens new avenues for volatility risk to retail investors. For these investors, that can mean having to weather sudden price swings after normal trading hours.
"Robinhood’s tokenisation plan puts pressure on Wall Street exchanges... If incumbent exchanges can’t adapt, they risk being left behind as mere custodians of a less functional version of the same assets." - Galaxy Digital
