Robinhood Plans Ethereum Layer-2 Network for Tokenized Assets

Robinhood has announced its plans to develop an Ethereum layer-2 scaling network for trading digital representations of assets such as stocks. This initiative is part of Robinhood's broader strategy to expand its presence in the cryptocurrency space, despite the existence of similar products on competing networks like Solana. Johann Kerbrat, Robinhood's crypto general manager, expressed frustration with the fragmentation of liquidity across multiple networks, stating that having multiple digital versions of the same stock issued across different networks is counterproductive to creating a more efficient financial system.

Robinhood's decision to build on Arbitrum, an Ethereum layer-2 network, was driven by the desire to connect with other entities within Ethereum's ecosystem. This approach aims to cast a wide net and maximize participation, especially as Robinhood looks to expand its offerings in tokenized assets. Kerbrat emphasized the importance of compatibility with other players in the cryptosphere, noting that the company plans to launch tokenized stocks and ETFs first in the EU and then expand globally once regulatory clarity is achieved.

In contrast, Kraken and Bybit have already rolled out tokenized stock trading through Backed Finance’s xStocks, which operates on the Solana network. This highlights the differing strategies among major crypto trading platforms in leveraging competing networks and standards to modernize the financial system. Kraken's Ethereum layer-2 network, Ink, has remained largely unused, which Kerbrat found intriguing. He suggested that some companies prioritize launching multiple products to gain headlines, while Robinhood focuses on ensuring that its products are actually used by customers.

A Kraken spokesperson clarified that the company joined the xStocks Alliance to avoid fragmenting liquidity across multiple token standards and chains. The spokesperson emphasized that the goal is to make xStocks the global standard for tokenized equities, rather than promoting any single brand. Kraken is already working with a broad network of partners to expand xStocks to additional blockchains, with Ink being a key part of their roadmap. This expansion is aimed at accelerating mass adoption and unlocking access to tokenized equities.

Robinhood's CEO, Vlad Tenev, announced during an event in Cannes that the firm is working with regulators to bring the entire Robinhood ecosystem on-chain. This includes leveraging its own blockchain for trading and settlement, as well as supporting various financial applications. During a fireside chat with Ethereum co-founder Vitalik Buterin and Offchain Labs CSO A.J. Warner, Kerbrat highlighted the benefits of Arbitrum Stylus, which allows developers to write smart contracts in a variety of languages, including Rust, the primary language for programs on Solana. This flexibility is seen as a significant advantage, as it can appeal to a broader range of developers, including those from traditional finance firms and game developers.

Warner noted that Arbitrum Stylus enables developers to pull in specific libraries or components of their applications using the Stylus stack, while still benefiting from the battle-hardened EVM code. This capability is expected to attract more developers to the Ethereum ecosystem, further enhancing its appeal and utility in the cryptocurrency space. Robinhood's strategic move to build on Arbitrum reflects its commitment to creating a more integrated and efficient financial system, leveraging the strengths of the Ethereum ecosystem to achieve its goals.

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