Robinhood Launches Ethereum Layer 2 Blockchain Using Arbitrum For 24/7 Trading

Robinhood, a prominent financial services firm, has launched an Ethereum Layer 2 blockchain using Arbitrum, a scaling solution renowned for its speed and low transaction fees. This initiative is designed to facilitate 24/7 trading, self-custody, cross-chain interoperability, and seamless settlement, all without the need for third-party intermediaries. The tokenized stocks will initially be issued on Arbitrum, with plans to transition this functionality to Robinhood's own proprietary Layer-2 blockchain in 2025 or early 2026. This move is part of Robinhood's broader strategy to integrate its infrastructure more deeply into the cryptosphere and create a more efficient financial system for investors.

The decision to use Arbitrum over other networks like Solana was driven by a desire to avoid fragmentation of liquidity across multiple ecosystems. Johann Kerbrat, Robinhood's crypto general manager, expressed frustration with the existence of multiple projects, stating that tokenization becomes less beneficial when a digital version of the same stock is issued across multiple networks. Robinhood's initiative highlights the stark differences between major crypto trading platforms as they leverage tokenization to break from traditional methods of record-keeping and create more efficient systems for investors.

Robinhood's Ethereum-compatible network, based on Arbitrum’s design, is intended to cast as large a net as possible, expanding on tokenized assets and connecting with other entities within the cryptosphere. The company plans to launch tokenized stocks and ETFs first in the EU, with future plans to expand as regulatory clarity is achieved. This approach aims to maximize participation and compatibility with other players in the market.

The launch of tokenized US stock trading in the EU is a significant step for Robinhood, as the commission-free tokens will be available for trading 24 hours a day, five days a week. This move underscores Robinhood's commitment to leveraging blockchain technology to enhance the trading experience and provide more efficient financial services. The choice of Arbitrum as the launch rail is seen as a victory for both the rollup and the wider modular Ethereum thesis, further solidifying Arbitrum's position in the market.

Two days ago, Robinhood announced the launch of tokens that would allow over 200 US equities and ETFs to be tokenized and tradable commission-free for European customers via Arbitrum. Among the offerings are major companies such as Nvidia, Apple, and Microsoft. Additionally, the plan is to offer tokens connected to stocks of privately-held companies such as OpenAI and SpaceX. Furthermore, the company is introducing crypto perpetual futures for EU customers, with up to 3x leverage, and is backed by MiCA (Market in Crypto-Assets Regulation) licensing. For the US, there are plans to launch tokenized stocks and perpetuals, but these depend on ongoing regulatory clarity.

Built by Offchain Labs, Arbitrum is an Ethereum Layer 2 scaling solution that uses Optimistic Rollups, which means that transactions are processed off-chain, making them much cheaper and faster. One of the reasons why Robinhood likely picked Arbitrum is that it is 100% Ethereum Virtual Machine (EVM) compatible. As a result, every smart contract that works on Ethereum works on Arbitrum without modification. In addition, it’s easier to integrate with Ethereum DeFi protocols and liquidity pools. Arbitrum also inherits Ethereum’s security guarantees, which come in handy for companies like Robinhood that need regulatory assurances about asset custody and transaction finality.

Robinhood's crypto expansion has driven its shares to surge by approximately 12% to 13%, hitting record highs. This initiative is part of a broader transformation towards a financial platform that fully embraces crypto and blockchain technology, positioning Robinhood as a leader in the integration of traditional finance with the cryptosphere.