The “Party in the Back” of DeFi

Robinhood is one of the simplest user experiences in finance.

Its app, or front end, is incredible at converting a user’s opening of the app to an action that generates company revenue.

We could say it’s all business up front.

The major unveiling of Robinhood Chain, on the other hand, could best be described as the party in the back.

Robinhood Chain is the layer-two chain that was originally announced a year ago during the To Catch a Token event in Cannes, France.

Tenev presenting at his To Catch a Token event | Source: Robinhood

It was an ambitious plan. One we broke down last year in The Bleeding Edge issue Tokenizing Stocks.

Robinhood CEO Vlad Tenev explained it onstage using an old-fashioned chalkboard in the same location where the classic Hitchcock film To Catch a Thief was filmed.

The chalkboard was quite busy by the end of his talk, showcasing how his company, through a series of phases, would offer the market tokenized assets.

His ultimate goal was clear – to enable 24/7 global markets for any asset.

The key layer to make this a reality was Robinhood Chain.

The very platform he announced on July 2…

And the details are a bigger deal than the market is making it out to be.

The Event

For this year’s event, Vlad stood on stage at the Old Royal Naval College in London.

The title of the event was “The World Is Flat.”

It was a play on words that leans into the company’s goal of making assets available to the world, using a nod to the Age of Exploration.

There were several announcements made during the event in terms of making certain features available to certain regions of the world. There was also a lengthy discussion on the agentic solutions that Robinhood has been busy on.

But the biggest unveiling was Robinhood Chain, a layer-two blockchain built atop Ethereum. It was only one year ago that the plan was originally announced to the public.

Vlad once again brought out the chalkboard…

Tenev presenting at The World is Flat event | Source: Robinhood

And here we are with the chain deployed, live, and with numerous protocols already launched. He’s followed through on what he mentioned last time around.

Robinhood has released stock tokens to more than 120 countries. The tokens are backed one-to-one, and ownership of the underlying assets exists even if Robinhood goes belly up.

It’s a custodial route, and it’s in part why it has not been made available to U.S. users yet. But as I’ll show you a bit later, that won’t be for long.

Now, what I found most interesting here is that the token is permissionless. There is no requirement for you to scan your driver’s license, punch in tax numbers, or enter your home address.

Anybody in these countries could swap for the assets if they have access to the internet.

The world is flat is a way of saying equal, easy, straightforward access to assets.

One of the Robinhood representatives even demonstrated the purchase of SpaceX’s stock token. The representative then went ahead and sent that same token to an individual halfway across the world.

That’s incredible.

Shortly after, a stock was purchased and sent to an individual. What would normally take a mountain of paperwork and weeks of working with brokerage accounts took mere minutes and a few clicks.

It’s an eye-popping demonstration that rips apart the walled garden approach of traditional finance. It opens our eyes to a world where assets are money, not just stocks to be held in your 401k.

This is what Project Crypto is about… It’s what happens when finance comes onchain.

And it gets better…

The Party in The Back

Robinhood Chain launched with a major list of partners already live on its network.

Arcus, Lighter, 1inch, Arrakis, and Uniswap are various decentralized exchanges that are already live.

In fact, Uniswap already processed more than $250 million in trade volume in a week.

We’re also seeing deposits show up from other chains to Robinhood Chain in order to explore the ecosystem.

The activity is rising and we’re just a week in.

And it’s all happening not completely on Robinhood’s app. The Robinhood app is merely a way for its current user base to tap into token stocks.

It’s also making it possible to use various decentralized finance (DeFi) apps that allow users to put their stock tokens or other assets to work. The presentation is simple and clean.

We can think of the retail app as the simple experience approach. Or said another way, “business in the front,” as they want sticky users with high usage.

Meanwhile, behind the scenes is where all the DeFi action is taking place – the “party in the back.” Whether it’s swapping, trading SpaceX on perpetual futures, lending assets, borrowing capital… There are protocols that make it all a reality.

We call this the DeFi mullet.

Which is to say, there is a lot of activity and possibilities thanks to what DeFi can do. And buttoned-up interfaces can mix and match solutions in the backend to give their users the experiences they believe they want most.

And when we see this reality of what is happening…

One where tokenized stocks are flowing permissionlessly through DeFi protocols…

It’s clear where we want to invest – in the mullet, so to speak.

But to really help map out just how exciting and soon this future will be.

What’s Coming

Robinhood Earn rolled out to U.S. users.

The feature allows users to buy a stablecoin and earn 7% annual percentage yield (APY) on the chain. Robinhood uses Morpho – a lending and borrowing protocol – on the backend to facilitate the process.

It’s a great feature that boosts returns for anybody trying to earn more on their dollars. But stock tokens are not available to U.S. users for a simple reason…

Robinhood Earn is only made possible with the passage of the GENIUS Act.

The piece of legislation that gives guidance for stablecoin issuance and its functions in the United States.

It’s key to making this a reality.

What Robinhood is showing us is the future of finance.

24/7 finance across swaps, perpetuals, lending, and borrowing. And it’s across assets. Not just a few assets here or there.

It just needs legislation like the CLARITY Act to open its doors to U.S. users.

And in all honesty, that might not be the case.

We just saw Ondo Finance – as we discussed on Monday in Tokenization Crosses a Line – now allows U.S. users to buy and sell custodial stock tokens… Which is a similar model to Robinhood.

Meaning we might just see Robinhood make its move sooner than the market thinks.

And once it does…

The tokenization race will be at full speed.

Your Pulse on Crypto,

Ben Lilly
Editor, Chain of Thought