Stock tokens + DeFi: Can Robinhood succeed this time?

The well-known retail trading platform Robinhood has launched its own Ethereum Layer 2 scaling solution, Robinhood Chain.

This project, which was first reported last year and finally launched today, has become a reality.

The official announcement used a long section (https://robinhood.com/us/en/chain/) to detail the technology stack used for this Layer 2 solution and the ecosystem applications it aims to build.

Robinhood Chain is a Layer 2 solution built using Arbitrum Orbit technology, submitting blobs to the Ethereum mainnet, using ETH as the payment currency, and is a permissionless Layer 2.

Its technical architecture is relatively clear and mature, so there aren't many technical highlights.

Its biggest highlight lies in the ecosystem applications.

As the official website states: "The blockchain for Stock Tokens."

Regarding the stock tokens supported on this chain and related important questions, the official website (https://robinhood.com/rhj/stocktokens/) provides very detailed answers in the FAQ.

• What is a stock token?

It is a tokenized stock that fully tracks the price of the underlying stock, but the token holder does not enjoy the rights of the stock (such as voting rights, etc.).

• Who can buy stock tokens?

Investors around the world who wish to purchase US stocks, but citizens of the United States, Canada, the United Kingdom, Switzerland, and certain other countries are not allowed to purchase its stock tokens.

• How to buy?

Through the Robinhood Wallet, on a DEX or CEX.

• Are the tokens really backed by actual stocks?

Yes. Each token is 1:1 backed by actual stocks. The corresponding physical stocks are held in custody by a U.S. custodian.

• If the stock corresponding to the held token pays a dividend, how does the token holder receive it?

The token holder will not receive cash dividends; instead, the cash dividends will be converted into corresponding stock tokens and distributed to the token holder.

• If Robinhood goes bankrupt, what happens to the tokens held by users?

The corresponding stock tokens will all be sold for cash and distributed to the token holders.

According to these official explanations, although the stock tokens launched by Robinhood are still not 100% "stocks," they have largely protected the economic interests of token holders.

Following the official launch announcement of Robinhood Chain, ecosystem partners such as dYdX and Uniswap shared the news, stating that their applications also support trading of these stock tokens.

Through this move, Robinhood introduces stock tokens with relatively secure economic rights into DeFi. As long as users are not citizens of the restricted legal regions, they can now purchase its stock tokens without permission.

Stock tokens (tokenized stocks) have existed in the crypto ecosystem for a long time, both on CEXs and DEXs on Ethereum.

I'm not too concerned about trading on CEXs because there are too many regulatory pitfalls there.

As for trading on DEXs within the Ethereum ecosystem, past stock tokens either only price-pegged and stripped of important economic rights (like dividends), or had very low traction, and lacked significant trading volume or liquidity.

Now, with its advantages accumulated in centralized exchanges, Robinhood is bringing stock tokens into DeFi, making it more noteworthy than existing tokenized stocks traded on CEXs or DEXs.

Can Robinhood's Layer 2 solution establish a large, vibrant, permissionless RWA (stock) trading ecosystem on-chain, as it hopes?

I very much look forward to its success, but there is a somewhat contradictory point in its current policy:

Its main user base is American users, often referred to as the "base of retail US stock investors," but it is now forced to not open to US users due to regulatory obstacles.

If it only relies on attracting users from other regions, how large can its ecosystem be?

Additionally, even if regulation allows it in the future and it fully opens its US stock token trading to US users, how many US users would actually participate in trading?

This is a point I have always doubted and am even less certain about.

For RWA to truly grow into a vibrant ecosystem as many hope, relying solely on institutions is not enough; a large number of active retail traders are essential. Therefore, building a permissionless RWA ecosystem on-chain for retail traders is a path that must be taken.

None of the major exchanges have taken this path; they have only deployed within their own CEXs, or occasionally tested the waters in DEXs they support.

Only Robinhood has now taken this bold step.

Let's see how it develops.