The Wall Street five-day work week is on the brink of disruption.
The reason has to do with news coming out of the French Riviera during an event called “To Catch A Token.” It was the type of news that will be felt for decades to come.
The name played off the classic Hitchcock thriller To Catch A Thief, which was filmed at the same location where the event took place.
During the event, Robinhood CEO Vlad Tenev dropped a company announcement. It had to do with how stocks, bonds, real estate, and even art will transact in its ecosystem.
But what’s more…
The news will forever dismantle the traditional five-day, 9:30 a.m. to 4 p.m., Wall Street work week.
It all has to do with what Tenev calls the “Robinhood Chain.”
His announcement hinted at how Robinhood will compete in this new era of blockchain-enabled finance. It will be able to iterate faster, attract developers, and give software functionality to users once walled off from the everyday investor.
This is the moment where financial experiments on blockchains begin their fast track to becoming the backbone of global finance.
To understand the significance, let’s get into what exactly happened in Cannes, France, at Tenev’s To Catch a Token event earlier this week.
Tenev made a series of announcements on Monday. The first wave of announcements mostly addressed Robinhood catching up to the market.
He announced the arrival of Robinhood to all European Union countries, new derivative markets, lower fees for trading, and the ability for U.S.-based investors to stake ETH and SOL on Robinhood.
These were all nice to see, but even in today’s blockchain-prohibitive financial system, that’s not exactly groundbreaking. We already see these solutions spreading across various venues with more expansive offerings.
What was revolutionary was the three-phase plan he drew up on a chalkboard for the audience – an on-theme visual that echoes a scene in To Catch a Thief.
Tenev presenting at his To Catch a Token event | Source: Robinhood
It laid out how, when a customer on Robinhood purchases a share of stock, the purchase runs through the traditional array of backends, brokers, and exchanges for Robinhood to acquire the share.
Most of us are already familiar with how this works with legacy trading platforms.
But phase one of his plan adds a step to this transaction wherein the acquired share is then sent to what Tenev called “the tokenization engine.”
It’s a piece of infrastructure that mints a tokenized form of the share before completing the loop back to the user. The user receives their shares in this tokenized form, versus receiving shares of the asset.
It’s an added step in the stock purchase. Meaning the user will hold a tokenized form of the share in their account and enjoy similar benefits to holding a traditional share, such as receiving dividends. It functions as shares always have, holds value as traditional shares hold value.
Then, when the customer sells that share, the token gets destroyed. This setup makes tokenizing shares an integral part of purchasing a stock.
If Robinhood were to stop here, I’d say that it’s a nice piece of tooling to help reduce reporting and auditing costs. And in doing so, they’ll be improving and reducing costs in the long run. But tokenization is just phase one. This isn’t just a new version of a stock.
If it were, users would still be restricted to traditional hours of exchange – 9:30 a.m. to 4 p.m., Monday to Friday. Shareholders wouldn’t necessarily realize any significant improvement beyond a slightly easier reporting and auditing process.
But that’s where phase two comes in.
In phase two, Robinhood’s newly acquired cryptocurrency exchange Bitstamp comes into play.
The exchange opens up the hours during which shareholders can transact. They can sell or purchase tokenized shares of stock at any time of day, on any day of the week. It’s how stocks become tradable 24/7/365. No more waiting for the allotted hours on allowed days.
We can think of this as a secondary venue for trading assets when traditional markets are closed – for now – on the weekend. It marries the crypto market that already trades 24/7 with the traditional financial system.
That’s pretty exciting, but phase three is where it gets incredible.
This is where Robinhood Chain enters the picture.
The chain is a layer-two solution on Ethereum that enables near-instant transactions with low fees.
The team mentioned they’ll be using Arbitrum’s scaling technology to do this, which is a layer-two Ethereum solution that’s been live since 2021. That means they can tap into Arbitrum’s resource-rich, battle-tested developer team. They aren’t starting from scratch.
What Robinhood Chain brings to users is twofold.
First, it brings self-custody. That means users hold the tokenized asset themselves. It isn’t in the custody of Robinhood or a broker. There’s no account lockdown or de-platforming possible when you hold the asset yourself.
While that isn’t exciting for most traders, self-custody is crucial to unlock the second aspect…
The Robinhood Chain is building decentralized finance (DeFi) solutions on the chain.
This means tokenized stocks can leverage solutions like lending and borrowing, swaps, investors providing liquidity, or staking yield/dividend yield swap markets.
It presents a world of potential new use cases.
Having a public and permissionless blockchain creates a situation where developers across the globe can build new applications and solutions.
Having this type of environment means Robinhood is positioning itself to iterate at a pace that Wall Street can’t fathom.
In such a financial ecosystem, a holder of Apple shares can borrow stablecoins against their stock to go ahead and purchase a home. Or say the stockholder wants to lock in a 5% dividend on their stock for one year to help finance tuition payments for their kid’s education.
The chain gives financial assets like stocks greater utility.
We typically think of stocks and bonds as core components of our portfolio. We seldom think of them as a solution for our everyday expenses. We’re not tapping into our shares to pay at the gas pump or checking out at the grocery store.
But that’s going to change.
Giving users the ability to make assets more productive and work for them unlocks greater use cases than we can imagine right now.
Smart contracts allow a degree of financial autonomy that is unthinkable in legacy banking and investment institutions.
If your portfolio, for example, is yielding a dividend of 4% on $500,000, DeFi makes it possible to lock in that 4% ahead of time.
This gives access to capital that perhaps you want to use to pay off your monthly mortgage, and you automate the entire process thanks to developers creating solutions for the assets you hold. It opens up an entire world of more dialed-in control over how you can utilize and allocate your yields.
And this is only using examples of what is already possible with existing protocols onchain. We truly don’t appreciate how finance is about to redefine itself thanks to tokenized stocks.
In fact, we didn’t even get into how Robinhood wants to change real estate, art, and other marketplaces that exist by using their new chain… or how agentic AI will be able to easily tap into these permissionless and public systems.
The opportunities that can be dreamt up would fill an entire textbook.
But what we do know is that the new age of finance is coming online now. Banks will begin scrambling to compete in this new public and permissionless blockchain environment.
We will reflect on this period and realize how defining the moment was when we moved to a world where finance is 24/7 and accessible.
The old regime is about to be upended.
This is one of the most exciting periods to be looking at blockchain technology.
Your Pulse on Crypto,
Ben Lilly
Senior Crypto Analyst, The Bleeding Edge
The Bleeding Edge is the only free newsletter that delivers daily insights and information from the high-tech world as well as topics and trends relevant to investments.
The Bleeding Edge is the only free newsletter that delivers daily insights and information from the high-tech world as well as topics and trends relevant to investments.
