Company leverages Arbitrum blockchain and Stylus technology to bridge traditional finance with crypto systems
Robinhood is rolling out a plan to turn regular stocks into blockchain assets. The brokerage’s strategy could eventually let users move tokenized securities across decentralized finance platforms.
Robinhood Markets, Inc., HOOD
The company launched phase 1 in Europe with nearly 800 tokenized stocks available through its app. These digital versions of publicly traded securities live on the blockchain but can’t leave Robinhood’s platform yet. Users can buy and sell them within the app only.
A.J. Warner from Offchain Labs explained the roadmap at Devconnect in Buenos Aires. Offchain Labs builds Arbitrum, the layer-2 network powering Robinhood’s tokenized stocks.
Phase 2 focuses on infrastructure upgrades. Robinhood bought Bitstamp exchange for $200 million earlier this year. The company plans to use Bitstamp to launch around-the-clock trading for stock tokens.
Traditional markets close at 4 PM Eastern. Crypto markets never sleep. Robinhood wants to blend these models by keeping tokenized stock trading open 24/7.
The technical challenge involves compatibility. Most financial systems run on C++ or Rust. Ethereum smart contracts use Solidity. Arbitrum Stylus solves this by letting developers write smart contracts in traditional programming languages while staying compatible with Ethereum.
Phase 3 is where things get interesting. Stock tokens would become fully permissionless. Users could withdraw them from Robinhood and deploy them across DeFi applications.
Picture buying tokenized Tesla stock on Robinhood, moving it to your personal wallet, and using it as collateral in a lending protocol like Aave. The tokens would work like any other crypto asset.
This removes brokerages and clearinghouses from the equation. Stocks become programmable pieces of code in an open financial system. Warner described phase 3 as giving users “the ability to interact with DeFi applications” with their stock tokens.
Robinhood hasn’t shared timelines for phases 2 and 3. The company is playing the long game with this infrastructure build.
The stock has surged 280% over the past year. Robinhood trades at a forward P/E ratio of 51 compared to Charles Schwab at 17 and Interactive Brokers at 27.
The company went public in mid-2021 and hasn’t experienced a bear market as a publicly traded entity. Some market watchers view the valuation as stretched given the premium over competitors.
Robinhood now offers zero-commission trading, crypto trading, subscription services, and sports betting. The tokenized stock platform represents another expansion of its product suite. Private equity tokens are also planned for the European offering.
