Robinhood Announces Tokenized Stocks!
David Hoffman:
[0:03] I'm here with vlad ceo of robinhood right at the end of their uh to catch a token summit vlad you guys launched so many things today as this
David Hoffman:
[0:13] wraps up share a little bit of your sentiment how are you feeling.
Vlad Tenev:
[0:15] I'm feeling really good i mean i think that there was one technical glitch which you probably noticed oh the
David Hoffman:
[0:22] Slow connectivity i thought that was easily overcomable.
Vlad Tenev:
[0:25] Yeah yeah so what turned out what happened was so many people were downloading the app and trying to get the stock tokens that it brought down the network so yeah but it turned out everything worked i thought the team did a nice job and it was a lot of fun you know we put so much work into these products the engineers are building them they've been working for a long time that i think the least we can do is put put on a nice event so that we can communicate the value as nicely as possible so i think it was a lot of fun it was hopefully the the crowd enjoyed it too you
David Hoffman:
[0:56] Guys did a great job. Now, I had the embargo. You guys gave us the embargo. So I knew it was coming. Yeah. Except for the private tokenized companies of SpaceX and OpenAI,
David Hoffman:
[1:06] which I think kind of stole the show for what everyone was excited about. And that's really something that is something that Robinhood is really tapping into what feels like just the financials like ice of our times. You know, with so much VC capital out there, companies are able to stay private later and later. This is something that we talked about last time you were on the show. Was this something that because after you built out the tokenized stocks product offering, you were like, oh, we could easily just extend this to private companies? Or what was the thought process behind that?
Vlad Tenev:
[1:35] Yeah. So the thought process was twofold. I don't know if you've caught the op-ed that I wrote in the Washington Post earlier this year. And really, I've been thinking about tokenization for many, many years. And the benefits of tokenization is very, very clear that it's the future.
Vlad Tenev:
[1:53] And it's very useful for Europeans and folks outside the U.S. And then when you communicate the value of the technology inside the U.S., it's sort of like talking about high speed rail when you already have medium speed rail. And by that, I mean, in the U.S., we already have pretty robust financial infrastructure. It's not amazing, but we don't have 24-7, We have 24.5 trading of stocks. It's pretty good. It's pretty easy to use. Robinhood, I think, has played a role in democratizing it and making it accessible to tens of millions of customers. So the delta between tokenization and the existing infrastructure for public stocks is there.
Vlad Tenev:
[2:36] I think it will happen, but it's perhaps a little bit less severe than outside the US. But one benefit that I think is very, very strong is the ability to to make all kinds of assets tradable, even those that aren't on liquid exchanges. And private stocks are this thing that you know, it's frankly a big problem. You have companies like SpaceX and OpenAI that are worth hundreds of billions. They're essentially able to raise unlimited amounts of capital while staying private. And if you're a retail investor, you're shut out from all of that appreciation. Even a high net worth investor has difficulty getting into some of these companies.
David Hoffman:
[3:16] And interestingly enough, they're also the coolest companies that everyone wants access to.
Vlad Tenev:
[3:20] Yeah, it's actually, it concerns me quite a bit that AI, I believe, is going to be an incredibly transformative platform shift, probably bigger than we've had before, bigger than mobile, maybe even bigger
Vlad Tenev:
[3:33] than the internet on relative terms. And yet it's not like the internet where you had the dot coms and you could have exposure to all of these assets in the private markets. By and large, a lot of the innovation is in private companies that shut out retail. So if we can democratize it, make it available, you know, outside the U.S. Where there's clarity, but over time, bring this technology, which truly will allow 24-7 real-time trading of private companies to the U.S. as well. I think that could, I mean, I think that could resolve one of the greatest longstanding inequities in capital markets today.
David Hoffman:
[4:10] So I'm imagining this rollout to Robinhood Retail. There can only be so many shares of OpenAI and SpaceX on the market. It is a private company. There are shares that do float, that do trade, but there can't be that many. I could imagine the hype behind this growing quite large. And then all of a sudden there being a supply shortage of OpenAI or SpaceX shares
David Hoffman:
[4:33] to create a pretty premium, a premium on the shares. Do you have enough of those shares to actually supply to the market that has the demand for them?
Vlad Tenev:
[4:41] Well, this is just the beginning. And as I mentioned on the presentation, the OpenAI and the SpaceX shares right now are a gift to these users. So we had, I wanna say a million open AI, half a million of SpaceX. So you're right. The focus now is on making sure we can get them tradable 24 seven. I think that'll be a big technology unlock and we believe we have a path to do that. And then over the long run, we're gonna open this up much bigger. So I think you should be able to, on a secondary basis, transact a huge number of private companies, a large number of private companies, thousands. And then I think this could actually grow to a primary source of capital as well. So if you think about, you know, OpenAI, SpaceX, companies of that nature, they have raised tens of billions in funding, maybe hundreds of billions. And so if retail can become a mechanism and a vector, not just for secondary transactions, but for entrepreneurs when they want to raise primary capital, even at early stages. I think that's super transformative for entrepreneurship. And people don't talk about that enough. I think that could lead to more startups and more entrepreneurship in the world by a very, very wide margin.
David Hoffman:
[5:57] Yeah, certainly. There's something that the NASDAQ and the New York Stock Exchange should really be taking a look at, which is that there's a possibility that OpenAI, SpaceX, say this tokenization vertical out of Robinhood really gets a lot of traction, the traction that I'm sure you wanted to. If there is dominant liquidity for these assets that happen on chain and inside of crypto venues, and the companies can also raise money from retail investors or just from the private market world, even though it's trading publicly, there's perhaps just never a need for these private companies to actually do the traditional IPO and go on the public traditional markets, but they can go on the public blockchain markets. Is that a world that you're trying to foster?
Vlad Tenev:
[6:37] Well, I think a lot of people ask about, alternatives to the traditional IPO process, I think we've already seen an alternative to the traditional IPO process, which is companies just staying private essentially forever. I mean, these companies have an alternative. They could just keep raising unlimited amounts of capital in the private markets and in doing so shut out retail potentially forever. I mean, you've had some founders say that They never plan to go public.
David Hoffman:
[7:11] It's a burden. Yeah.
Vlad Tenev:
[7:12] So I think the solution for that case is, I mean, I'm generally pro the IPO as a process. Of course, it's gotten very burdensome, but Robinhood became a public company in 2021.
Vlad Tenev:
[7:26] I think some people in the environment will just choose to not go public. And for that, we need to figure out how to unlock the private shares and make them available to retail as well.
David Hoffman:
[7:38] Certainly. Now, there's a notion that capital begets capital, liquidity begets liquidity. And again, if these private companies start trading on crypto venues, you can see the dominant price discovery of these assets, the liquidity of these assets happen on chain or on Bitstamp for when it's weekends and amongst those other things. And one of the big features of this is the 24-7, 365 markets that tokenization really enables for you. There have been some promises that the crypto industry, checks that we wrote as an industry back in 2011, 2013, everything is going to come on chain. We're going to tokenize the world. 24-7, 365 trading, include retail earlier and earlier in the process. And just there's a couple announcements here. The tokenized stocks, tokenized private companies, and 24-7, 365 trading of traditional assets all happening in this announcement. And so I'm getting this idea that, well, there's a few instances of Robinhood actually cashing that check that the crypto industry conceptually wrote in 2013.
David Hoffman:
[8:38] So it gets me excited. There's no real question here. Yeah. But there's a full circle coming here at this event.
Vlad Tenev:
[8:45] Yeah, I think that it's really interesting. Yeah. There has been a lot of talk and legitimately not a ton of action in the form of usable products that are compliant in like real jurisdictions. And I think the problem, the reason it's taken this long is you need to be incredibly strong at two things that are very, very different. One is there needs to be a certain amount of like regulatory know-how, working with regulators, trad fi muscle, I'll call it, that we've kind of refined over 10 plus years of being regulated very, very heavily across multiple jurisdictions. We also have to understand these assets and these traditional assets that we have to tokenize. And we've built up a very, very scaled traditional financial services business while simultaneously becoming one of the largest players in retail crypto in the U.S., but now expanding outside. And so I don't think too many companies can bridge that gap of being very, very strong in TradFi and crypto. And I think that's what's needed to merge the two. And also just being sort of like more muscular from a regulatory standpoint where, you know, we've worked hard over the past 10 years. And a lot of the policymakers and regulators that have helped make this happen are actually at this event tonight.
David Hoffman:
[10:10] Right. Certainly. Yeah. So one of the announcements that you guys had is perps, futures, perps for crypto assets.
David Hoffman:
[10:16] But once you have a tokenized stock, that also becomes a crypto asset. So down the line, is there on the roadmap, perps, perp futures, as you announced for crypto, but for tokenized stocks?
Vlad Tenev:
[10:27] That's a good question. I think the intent is the technology that we've built here is incredibly general. It can be used to power and tokenize pretty much anything. And actually...
David Hoffman:
[10:42] Private stocks and public stocks are quite different mechanically as assets.
Vlad Tenev:
[10:48] So, you know, we'll take customer demand. We'll probably have futures versions of crypto assets. I mean, we've listed a bunch of those in the U.S. Already with, you know, the micro XRP and ETH and Solana futures, which are sort of like TradFi instruments of crypto products. And then with tokenization, It's crypto instruments that reflect TradFi products. And we'll just offer everything the customers want in a safe and compliant manner. That's the goal.
David Hoffman:
[11:23] The crypto idea is that perps are better than options. And so the crypto believer will say like, oh, well, if it's a head to head competition between perps and options, people are going to use perps every single time. It's more intuitive. It's more easy to think about. And so I would hope that as perps becomes more understood by the audience, the consumer base, that perps as a financial instrument would proliferate, you know, alongside the rise of tokenized equities, tokenized stocks. That's my that's my attitude. I don't know if you have a comment on that or just or anything at all.
Vlad Tenev:
[11:53] You know, I don't want to upset my options friends. I think they have their unique use cases. I mean, there are certain scenarios where an options trade might make sense. And, you know, you could put together a multi-leg strategy and benefit from sideways markets perhaps a little bit more easily than you could with a straight up perpetual future. You could have, you know, iron condors or butterflies.
Vlad Tenev:
[12:21] These are things that our active traders are really experts in many cases. So if there's a demand for those products, we have the capability of adding them as well.
David Hoffman:
[12:31] And with the access for the United States markets, which I'm sure plenty of United States viewers watching this and also watching the announcement, I'm sure just chomping at the bit to get their hands on perps on the side of Robinhood or tokenized stocks on the side of Robinhood. I know you guys are barred by the CFTC. You guys need the CFTC to give yourselves a thumbs up. Coinbase, I'm sure, is also waiting for that same regulatory green light to launch these tokenized stocks for their retail base. Are you in conversations with the CFTC? Are we at the beginning of this conversation?
David Hoffman:
[12:59] Kind of where are we for U.S. citizens getting their hands on these things?
Vlad Tenev:
[13:02] Yeah, I mean, it's our belief that tokenized stocks in the U.S. Will end up being governed by the SEC, regulated by the SEC.
David Hoffman:
[13:11] I mean, that was the perpetuals conversation. Pardon me.
Vlad Tenev:
[13:13] Yeah, the perpetuals would be governed by the CFTC. And when it comes to stocks, I think there's openness from the SEC, the Crypto Task Force, who we have been having meetings with. You know, Johan, our crypto GM, was in Washington a couple of weeks ago on the tokenization roundtable, which was hosted by the Crypto Task Force. And yeah, it's our belief, actually, that this can be done by the SEC alone without the need for additional rulemaking by Congress. And they seem open to it. But I think in the US in particular, we want to make sure any product we roll out is fully compliant and the regulators are on board every step along the way. In particular, because our offerings in the US are so good already. We've got 24-5 trading, a huge universe of stocks. It's very easy to use with Robinhood.
Vlad Tenev:
[14:11] So you would get weekends and holidays, which are nice. but we want to make sure that very, very good and an amazingly compliant product. And we think we can get there. We have the technology. We think we can get there relatively soon.
David Hoffman:
[14:27] Certainly. So Robinhood has become a leading crypto platform for its retail user base, largely because you guys have so much distribution. Your crypto products previously have lagged other competitors, whereas like Coinbase has more assets on their platform. They had their wallet before Robinhood had the wallet. And so when Robinhood would release a product, it would generally be somewhere between 6 to 12 months behind a Coinbase product because Coinbase is crypto-specific, it's crypto-native. Robinhood, you have plenty of TradFi activity that you also need to maintain. But on this, with the announcements here today, some of them are products that Coinbase just announced just a few weeks ago. And with many of the on-chain stocks, that's actually leapfrogging Coinbase. They kind of beat them to a punch on a number of the things. So is this Robinhood becoming a leading crypto-native company? I know 30% of your revenue already comes from crypto. And so where do you think your relationship with crypto grows? Are you investing even further into this industry? Are you guys trying to go and take down Coinbase? What do you think?
Vlad Tenev:
[15:24] Yeah, it's an interesting question. I'd say traditionally, you're right. Our approach to building products and rolling out features has sometimes been described as Apple-like in the sense that Apple really uses it. It's usually not the first to market, not like the bleeding edge innovator, but they sort of like focus on the user experience and the design and the product quality and make it very, very accessible. And I think that's been a good analogy. I mean, we, I think when you bring up the wallet as an example, like our wallet wasn't the first to market, but I think it was the first to market.
Vlad Tenev:
[16:03] In an intuitive way that rolled out features like gasless swapping, which I think if you're a retail user and you expect this technology to go mass market, like thinking through the gas and the fees and a different currency is just very, very confusing. So we felt like gasless swapping was important. And I think we were actually one of the first to enable that. But you're also right that, you know, now we're kind of pushing the frontier. And I think we are the first big platform or at least among the first to roll out these tokenized offerings and with the private company stock tokens definitely on the bleeding edge so it's a new place for us to to be in we're we're usually used to you know coming in later into a market taking share through just like price competition efficiency sort of a war of attrition and and now being first but bringing that capability of lower pricing great technology it's it's fun so we'll see how it goes last question,
David Hoffman:
[17:01] Vlad, and I know you have to hop to another interview. The layer two, the Robinhood chain.
David Hoffman:
[17:05] Yeah.
David Hoffman:
[17:06] Talk to me about what the long-term relationship is between the Robinhood app and the Robinhood chain. And I think listeners and myself, our frames of knowledge are going to come from the relationship between Coinbase and BASE, where BASE is actually a pretty big universe in of itself. And then Coinbase also uses BASE to get Bitcoin back to loans, and they offer that straight through the front end. Is this kind of something that you're trying to do similarly with Robinhood, where you have, it's a developer ecosystem, developers can build permissionlessly on the Robinhood chain, or are you more using it just to settle backend logic for your own needs and your own simplicity?
David Hoffman:
[17:39] How do you think about the long-term relationship between Robinhood and its own layer too?
Vlad Tenev:
[17:43] Yeah, and by the way, I think the team over at Base, it's a good team. I think they've done a very, very nice job and they're pushing the sort of like Base is for everyone campaign, which I think has been relatively effective. I think our niche in this space is it's maybe not going to be useful for everyone in every use case. But what we intend to do is make it the best chain for real world assets. I think real world assets have very specific needs and qualities and making this the best chain for real world assets, starting with stocks, going into private company shares, We mentioned real estate and art, and those things are very, very interesting to me as well. And combining that with the lowest possible fees, and really, I like to call it, we're trying to build military-grade robustness. I think that's going to be exciting. And I do think that that's going to be an interesting proposition that should attract some developers. We talked to a lot of folks building chains and the value prop that i hear a lot of is you know this is the number one chain for dgens sure yeah i probably i probably met like seven or eight dgen chain builders um and we're trying to go in the opposite direction we wanted to be the number one chain for real world assets and for it to sort of confer fundamental utility to to all participants cool
David Hoffman:
[19:09] Well vlad i can say i'm i'm excited for what you guys have announced i'm and pretty optimistic for what you guys can do. And it's nice to see another big company helping the world move on change. So we appreciate it.
Vlad Tenev:
[19:18] Thank you. Yeah, thank you for joining us here and helping be part of the journey.
David Hoffman:
[19:23] I do have to ask, last time we had you on the show, we talked about tokenization
David Hoffman:
[19:27] of X3Ds and you talked about the private markets and all that. And I wrote this article on Banklist the next day saying Vlad wants to tokenize SpaceX and OpenAI. Yes. So these plans have been in the works for a while or when did that idea come about?
Vlad Tenev:
[19:42] Let's see. Well, I talked about SpaceX and OpenAI in the op-ed. And what I found is if you write about stuff often enough, sometimes it ends up happening.
David Hoffman:
[19:55] You manifested it.
Vlad Tenev:
[19:56] Yeah, I'd like to think so. And of course, it's really nice to see that a lot of competitors have been jumping on and trying to do this stuff too, which I think would be good. I think I'm here for the future when everything is on chain And we move beyond Bitcoin and meme coins into a place where crypto is actually very, very useful and it confers fundamental utility to participants. And I think that's going to be exciting. And the time has come. I think it's this year.
David Hoffman:
[20:25] Vlad, congrats and thanks for coming on the show.
Vlad Tenev:
[20:27] Thank you so much.
David Hoffman:
[20:28] Cheers.
David Hoffman:
[22:25] I'm here with Johan,
David Hoffman:
[22:26] The GM of crypto at Robinhood. Johan, people are familiar with Vlad,
David Hoffman:
[22:30] the CEO. I think people are a little bit less familiar with Johan. Tell us a little bit about yourself. What's your role in the whole Robinhood universe?
David Hoffman:
[22:38] Yeah, so I lead the crypto business at Robinhood. So everything that is related to crypto usually goes around my team. And, you know, we are really excited to have launched all these products today. I initially joined Robinhood a bit more than four years ago as a CTO for the crypto group.
Johann Kerbrat:
[22:50] And I've been running the business for a few years now.
David Hoffman:
[22:53] And so all of the big decisions that happen in the crypto universe of Robinhood, the Bitstamp acquisition, the Robinhood wallet, all of this is under your oversight.
Johann Kerbrat:
[23:03] Yes, I would be right. So my team and I, you know, we work very hard on all this announcement and this project and this acquisition. And so we are really excited to see, you know, the enthusiasm from people here.
David Hoffman:
[23:14] So the acquisition of Bitstamp was a pretty big deal. Before that, there was the Robinhood wallet. Before that, there was just, you know, you could buy select crypto assets on Robinhood.
David Hoffman:
[23:23] There's been certainly a crescendoing of activity on the crypto side of things from Robinhood. Just talk a little bit about Robinhood's long arc with crypto. It seems to be growing. It seems to be like crescendoing and excitement. Talk about that arc and where we are today. Yeah.
Johann Kerbrat:
[23:38] So, you know, we launched crypto in 2018, to your point, with just a few assets. And then we started to add more assets. We started to add functionality, like transferring the Robinhood wallet, which was our self-custody wallet. And slowly we, you know, really build on this vision that crypto and blockchain technology can be the backbone of the financial system of tomorrow. And really what this event is about is how will we rebuild Robynode using blockchain technology. And, you know, in the EU, we're actually almost all in blockchain technology. So now EU customers can actually trade crypto, stake crypto, but they can also do perpetual on two assets. And they can also do stock tokens to get exposure to U.S. stocks. and ETF and so
David Hoffman:
[24:19] I think that's what's really exciting for me.
Johann Kerbrat:
[24:21] You know, I joined Robinhood because I wanted to bring this mass adoption and stop talking just about the technical and the protocols and actually giving
Johann Kerbrat:
[24:28] tools that people can use every day and use blockchain.
David Hoffman:
[24:31] So Perps is one of the big announcements that you guys had today. And Perps is a financial instrument that was created in the crypto universe, but isn't inherently crypto by any means. It's just a neutral financial instrument, in theory, that could have gone into the regular Robinhood app for regular tokenized or non-tokenized assets, normal equities. But instead, it is first being primarily introduced in the crypto context, of which it's native. So that's under your domain. Talk about that choice to keep it inside of the crypto context when it could have also been applied to more normal financial instruments in the rest of Robinhood.
Johann Kerbrat:
[25:03] Yeah, I mean, I think, you know, there is a few issues on, you know, the CFTC side. And for example, perhaps are not necessarily something that exists in the U.S. today. We can do like long dated contracts, but it's not something that really is a perpetual that roll over indefinitely. And so in the EU, we received our license, our MIFID license and our MICA license. So we're able to actually bring perpetuals. And it's something that is really exciting because, you know, a lot of what we are saying on stage was about how complicated it is to use perps on different platforms. And you can very hardly do it on a phone. You know, you always have to update, you'll take profit, you'll stop loss. You want to make sure that, you know, you're not going to lose too much money or take too much risk. And so you're always having to kind of stay at a desktop to use it. And so what we wanted to build on Robinhood was really an interface that you can use on an on-to-go basis, basically. And just with a swipe of a finger, being able to update your position and your strategy and make sure that you don't take too many risks.
David Hoffman:
[26:02] Do you see the Perps instrument spreading further and more integrated into the rest of Robinhood? Or is it kind of you'll follow the demand? We'll see how it is adopted. How do you see it expanding?
Johann Kerbrat:
[26:14] Yeah, I think, you know, there is two aspects for the Perps. There is the retail. There is also the institutional aspect. So the backend that we're using for Perps is Bitstamp. And that exchange is actually open to institutions. So we expect to see institutions also coming to that. But we also announced stock tokens today that are like
Johann Kerbrat:
[26:30] token that gives you exposure to US stocks, US ETF. In a world where you have crypto tokens and perps combined together, you could see a world where you can, you know, have perps on tokenized asset,
David Hoffman:
[26:43] Basically. Let's talk about the chain, because I think that's one of the most exciting announcements that we've seen out of today. But there was also a choice that was made. I'm fuzzy on the details, but I understand that there was also a potential deal, some sort of deal with Solana about some interest in working with Solana. Maybe that deal is still open. I don't know. But what we heard from today out
David Hoffman:
[27:04] of Robinhood was the launch of a Layer 2 on the Arbitrum Orbit tech stack. So talk to us about that choice, that strategy. Why was that the right strategy for Robinhood?
Johann Kerbrat:
[27:12] Well, you know, there was a few things. We talked to a lot of chains. So, you know, when the rumor started, it was just about the fact that we were talking to chains. And for us, we wanted to understand, like, do we want to use an existing permissionless chain or do we want to build something that is custom for us? And really, when we started to look at the complexity of what we were trying to build and all the ambition that we have around stock tokens and bringing the financial system on chain, we felt like having our chain was giving us a lot more optionality. We are able to build the right regulatory requirements on the chain and also making sure that, you know, it can scale with us.
David Hoffman:
[27:47] And why Arbitrum, you know,
Johann Kerbrat:
[27:49] For us, there was a few things. We really liked the fact that the way that you can use stylus, which is a system that basically allows you to use any kind of code. So you don't have to be stuck with one as a type of code, but you can actually bring like Rust, C++, whatever you want. And so that's very helpful if you're thinking about the long term and the type of products that we want to build. The second thing that we liked was the priority queue system that is non-predatory. And also, you know, we have been a good partner with Arbitrum for a long time. We've partnered a few times on the wallet. And we overall expect to be a good partner with every chain. So you mentioned Solana. We offer, for example, no fees on the wallet on Solana if you're a gold customer. We also offer staking on Solana on multiple platforms. So we want to be good partners with everybody.
David Hoffman:
[28:34] Okay, so just to trace over what I heard you say, the main reason why the Arbitrum Layer 2 was selected was, one, the customizability, and also, two, the reading between the lines, the MEV control, as in if you guys run the sequencer, you know, MEV is a very legally dubious topic. And if you outsource that to external parties, then all of a sudden there's a little bit outside of your control. So if you have a single sequencer, which I would imagine Robinhood is going to run, you guys just can make sure that there is no things like front running, back running, things that would otherwise be illegal in a traditional context because you guys are operating the chain. So customizability and control, is that kind of the two key features here?
Johann Kerbrat:
[29:10] Yeah, some of the features. You know, there was also the interoperability between multiple ecosystems, Ethereum being a big one. You know, there's many on EVM. So we were really excited about that. But yeah, I think you're right. I think the idea of having just one sequencer is not necessarily true. Like, you know, I think at some point we'll want to bring a decentralization. And I think using the Arbitrum stack is helpful for that. But, you know, I think you're right. We want to make sure that we can control the products that we are going to launch at the beginning, but also build tools that are kind of the platform for everyone else to build on top of it and use the technology that we are creating today.
David Hoffman:
[29:48] Let's lean into that interoperability word. If you say that you are interested in interoperability right after you talk about an announcement of tokenized stocks, I get images of these tokenized stocks moving beyond Robinhood chain. Is that an explicit part of the plan? Talk about that future. Yeah, absolutely.
Johann Kerbrat:
[30:04] You know, I think for us, the idea of tokenized asset has been that we are removing them from the wall garden. And so you can transfer them between broker. You can do a lot more things with it. Maybe, you know, you can use all the things that you're thinking about DeFi and assets. And so for us, we know that, you know, people want to move to a different chain or they want to move to a different platform. And I think it's part of the DNA.
David Hoffman:
[30:27] If we want that product to be really successful,
Johann Kerbrat:
[30:29] We don't want to recreate another traditional finance system. So definitely.
David Hoffman:
[30:33] So are the stock tokens, are they whitelisted? Or what are the transferability conditions that are built into the token contract of the Robinhood stock tokens?
Johann Kerbrat:
[30:42] Yeah, so right now what we announced today for the launch, we are going to just allow it within the Robinhood app. And we are going to open self-custody pretty soon. You saw it during the demo. We tried to transfer from our self-custody wallet to the Robinhood app. And so we are kind of ready to go. We just want to make sure that, you know, the product is working well before we open the gate. Okay.
David Hoffman:
[31:04] So are there, is there a whitelist contract as in if I say, say I'm a, I have a Robinhood account or, or excuse me, an Arbitrum wallet and I send my equity tokens to my wallet. Can I send it to a friend who has another Arbitrum wallet or would they have to also be a part of the Robinhood KYC universe?
Johann Kerbrat:
[31:23] Yeah, in the future, we would want everyone to be able to transfer between each other. I think where, you know, the mint and burning will be where you will need to be either a Robinhood customer or you will have to be a customer of somebody that is compatible with Allstack.
David Hoffman:
[31:36] Okay, cool. It makes sense that you guys have chosen Arbitrum. I was talking to AJ about this because Arbitrum is so inherently DeFi focused. So, you know, it's one thing to be able to buy and hold tokenized equities, you know, private companies especially. But it's another thing to be able to compose those into a broader DeFi ecosystem, which Arbitrum definitely has. And so are you envisioning a world where there's an Aave implementation on the Arbitrum layer two? Or there's a Uniswap. So can you see these tokens being interoperable with the existing DeFi Arbitrum ecosystem?
Johann Kerbrat:
[32:10] I mean, that's a goal. I think we want in the future to be able to do all of this. I think it's going to be hard for me to tell you, is it going to be a Aave? It's going to be a morpho or something else. But we want to make it compatible, and that's why we picked kind of an EVM-based solution for our layer. Otherwise, you know, we could have done our own layer one or we could have kept it on a non-permissionless chain. It would have been a lot faster and easier.
David Hoffman:
[32:35] But there's also nothing inherently stopping you guys from issuing these tokens on Solana in the future, right? If there's demand there, could you also see yourselves tokenize these across many chains?
Johann Kerbrat:
[32:44] I think bridging is going to be part of the strategy. overall, you know, like I think, again, we want everyone to be able to use it. And so for that, I think you need to be able to give access to everybody and
Johann Kerbrat:
[32:54] you won't be able to do that if you limit yourself to just one chain.
David Hoffman:
[32:58] So when I was listening to Vlad talk about with the whiteboard session, he talked about all the different components of the Robinhood world, especially as it came to issuing these tokens and then also having them trade on Bitstamp when, you know, the very constrained traditional markets are only alive, you know, so many hours of the week. But now Bitstamp can trade them 24-7. And then you also have the Robinhood wallet as well. There's a very tightly integrated ecosystem of components that are being woven together there. Was that your mastermind? Is that your strategy?
Johann Kerbrat:
[33:29] Well, I don't know about that. I think, you know, we have a very big team with a lot of talented people. But I think for us, that was kind of the idea. The exchange when we acquired Bitstamp was this idea of not being only reliant on market maker, but being able to support some of the new products we are thinking of, like tokenized assets. And the Robin wallet is also something that, you know, four years ago when we were starting to build it, the idea was really to think about the DeFi world and think about the fact that at some point people may not want to use centralized platform. And so it's great to see everything going together and, you know, we hope to keep going like this and there is a lot more plans that we have shared also on the private stock, for example, that is going to really get together nicely in this ecosystem.
David Hoffman:
[34:12] Spawning a brand new chain is a pretty big undertaking. It's one thing to use your own chain to deploy your own assets and to do the backend things that Robinhood needs to do, which I think we're all very happy about.
David Hoffman:
[34:24] That's what blockchains are for. That's one of the big bull cases. But there's also the conversation of, well, the Robinhood chain is also going to be permissionless as well for developers and users. So that means that any old developer can come and do things on Robinhood chain. Is that a specific vertical that you are trying to foster?
Johann Kerbrat:
[34:40] Yeah, we are excited about that. I think we call all the developers that want to be working on the WhoChain that want to talk to Robin Hood about this like it's something that we want to do and we think that will happen for us it's So the big long-term vision is that everybody can use the stock tokens, everybody can build on it, and you can see more type of real-world assets. And so for that, we will need a lot of developers because as important Robinhood is and with a great team that we have, we can build the entire DeFi world. There's so many things being innovating every day. And so we think that it's all coming together.
David Hoffman:
[35:15] So Robinhood, about 30% of Robinhood revenue comes from crypto products, which I think if you told that to the average Robinhood shareholder or just the average person in traditional finance, they might be shocked about how high that number is. Where do you see the trend of that number going? Because Robinhood also has a bunch of TradFi products.
David Hoffman:
[35:33] They just launched Robinhood banking. They just launched Robinhood strategies. So it's not like neglecting by any means. It's TradFi side. But also some of these announcements are pretty amazing. So where do you see this 30% crypto revenue going in Robinhood? Do you see that increasing, staying the same?
Johann Kerbrat:
[35:50] You know, I think it's hard to say. Like, if you think about last year, we had so many great products on Robinhood, not just on the crypto side, but, you know, event, contract, future, like so many new things. And so I think it's just the business as a whole has been growing. And so that's been what's really exciting. But I think for us, what we've been mostly focused on is less about, you know, the share internally of what is Robinhood crypto doing versus the other businesses, but more like what market share we're able to get outside of Robinhood. And, you know, we've been able to grow our market share nicely in the past few quarters. And I think that's really a good signal that we are building what our customers are really excited about.
David Hoffman:
[36:26] Let's fast forward five years, 10 years, and everything that you want about your on the crypto side of Robinhood comes true. Paint us a picture of what that looks like. You have the Robinhood app. You have the Robinhood chain. You have the Bitstamp exchange. You have these tokenized equities, tokenized private companies.
David Hoffman:
[36:43] There's a big, there's a good number of puzzle pieces here. When all of these puzzle pieces that we know of come together and maybe some additional ones that we don't know of, what does that picture look like?
Johann Kerbrat:
[36:53] Well, I think, you know, for us, we've been not really keeping a lot of secrets. Like we want to make Robinhood available everywhere in the world. So that's one big thing. We have a wallet that is available in a lot of countries, but we also want to bring the entire Robinhood stack, like stocks and futures options, all these things. And the next thing also would be like, we want a lot more of the traditional system to be on chain. So ideally for me, in a few years, you use the same Robinhood that you are using today as a U.S. Customer, and most of it is using on-chain. It's a lot faster, it's instant, it's 24-7, and you don't even know it because you don't need to know all the details about the protocol.
David Hoffman:
[37:31] Do you think you guys can dethrone the NASDAQ and the New York Stock Exchange as the centerpiece of liquidity in the future?
Johann Kerbrat:
[37:37] Well, I think it's going to be interesting to see how the market responds to this type of assets that are being tokenized. But it is going to create a lot of opportunity. Like, you know, during market, during weekends, off market hours, all these things, like you will start to see a lot more people trading these assets.
David Hoffman:
[37:54] Will there be a token for the Robinhood chain?
Johann Kerbrat:
[37:57] Currently nothing to announce there. I think, you know, right now for us, the focus is to launch some of these new products and see how people are using it. And then we'll share more detail on that later.
David Hoffman:
[38:05] Johan, you've gotten a lot of people excited today, including myself. So thank you for all the hard work that you've been putting in. And I think we'll be watching Robinhood with pretty good interest. Thank you for having me. Cheers.
David Hoffman:
[39:50] We're here with AJ from Arbitrum.
David Hoffman:
[39:53] It's a big day for Arbitrum. How do you feel?
AJ Warner:
[39:55] Yeah, it's awesome. It's really exciting. I'm really excited to be partnering with Robinhood on this. I'm really excited about their vision, particularly about sort of reconstructing their platform for their users with CryptoRails. And yeah, it's an incredible day. I'm sure we'll get into it. But yeah, it feels kind of surreal in the moment.
David Hoffman:
[40:13] The Arbitrum-Robinhood partnership goes back pretty far, like two plus years.
David Hoffman:
[40:18] I don't know what the partnership looks like way back when. Maybe it was just an initial deal, but it's certainly crescendoed over the years to where we are today, where we are seeing Robinhood do something very innovative, which is launch stocks that are not trading on Robertium with a little Arbitrum logo right there. Talk about the crescendoing of the Robinhood-Arbitrum relationship.
AJ Warner:
[40:39] Yeah, no, it's been really cool. So I remember, I think it was ETH Denver 2024, we announced sort of like the beginning of our partnership together. And it started with like Like a really simple, like Robinhood is going to support Arbitrum in their crypto wallet, easy access for users to trade on DEXs and sort of do other activities through that wallet experience. But we sort of started like laying the building blocks for a deeper, closer relationship. Our teams got close. Joe and I in particular, you know, sort of fostered a great working relationship. And our thesis with them has always been like be good partners. You know, for us, we don't have this vision that crypto needs to be at the forefront or that arbitrage needs to be at the forefront. We're a powerful technology that can power user experiences. And for us, Robinhood sort of and its place in fintech was always the best partner. So, you know, we developed this relationship and obviously crescendoed into where we're at today. But the same like elements and thematic components of these guys are the best at building user experiences and we want our technology to be able to be flexible enough to be supportive of their vision to make their users happy.
David Hoffman:
[41:47] So I would imagine that there is not one long-standing Arbitrum Robinhood deal. There's one deal at a time and every single new thing that you guys do together has to be done on. Is this right for both of us? Do we like working together? So every single deal has to be one, right?
AJ Warner:
[42:03] Yeah, I think in many ways, like, you know, I think one of the core things that's really important for businesses that are moving as quickly as sort of both our business and their business is like flexibility to make sure that the products are right. Like, for example, today, they announced like Solana staking as well. And that's a great thing for their business. They're bringing that utility to their users. I would say tokenized stocks was always like the main prize that we were after, right? Obviously, you know, I joined crypto in 2014. And for me, it was ownership, sovereignty, and democratizing access. And there's nothing that does that more than just the tokenized access to everything. And as Vlad mentioned in phase three, the goal is for that to be, you know, self-custody, do with it what you want. And like that vision.
AJ Warner:
[42:46] Is incredible. So that was always, I would say like the North star of what we were hoping to collaborate on. And obviously that's where we're at today. And we're starting with them on Arbitrum One. So like today, for example, the demos that they did, those assets are all minting and burning on Arbitrum One and trading. Eventually they're going to be transitioning to the Robinhood chain, which the Arbitrum Orbit stack is going to power. And I think that's one of the really cool things. And one of the things that excited them about Arbitrum is the flexibility of what we can offer as a platform, right? We have Arbitrum One as a core economic hub of crypto and financial activity, and also the ability for them to take a stack and own it, own the customizations of it, whatever they want to do with it. And our team's going to be a strong partner in product design for what is the best product for their users. And there's a lot of reasons why people talk about wanting their own chain, but the ability for them to continue to compound their users on the Robinhood chain is going to be a very powerful thing as they build their hire company again on crypto rails. So again, like that flexibility of what Arbitrum can offer, I think is something that was a key component of this because the Arbitrum platform offers the flexibility that they might need in order to continue to build their
David Hoffman:
[43:59] Business on chain. Now, I think people are pretty familiar with the deal structure of base and the Optimism Collective. It's something like 15% of base sequencer fees or 2.5% of total profit, whichever one's greater, goes to the Optimism Collective. And that's kind of the deal of the Optimism Collective. Then that's kind of set the standard for the OP stack ecosystem. If you are willing to share, what are the economics of the Robinhood chain and Arbitrum?
AJ Warner:
[44:27] Arbitrum has a similar model with the DAO. It's a little bit different, but it's similar in the sense that if you want to launch an L2, which is what Robinhood is choosing to do, then you do a 10% profit share as well with the Arbitrum DAO. So it's a very similar model. I would say the differences in model are maybe some of the philosophical differences between super chain and orbit. So super chain, you kind of opt into like a shared governance model with interoperability with orbit. It's, you know, just sort of contribute back into the arbitrage and Dow on the profit share through what we call the AEP and then do whatever you want with it. Right. Right. We expect there to be interoperability, but it's almost like an orthogonal product question to use of the stack. And because we're not sort of locked in on orbit into specific, interoperability and governance mechanisms.
David Hoffman:
[45:13] We can have a lot more flexibility in design of the stack.
AJ Warner:
[45:17] So that's why you sometimes see Arbitrum, like you see L3s, you see L2s, you see custom gas tokens, you see all these different changes because the Orbit stack provides a lot more flexibility. And that was something that was like really important to Robinhood on this journey was to make sure that they had that flexibility with the stack to own it. So like they don't have to opt into shared governance or interoperability. They can if they want to.
AJ Warner:
[45:38] My suspicion is they won't prefer to, but yeah, that's how the Orbit stack structure works.
David Hoffman:
[45:43] Yeah, so it was pretty cool to see the Arbitrum logo right next to the OpenAI, you know, transfer one million shares of OpenAI in the Robinhood app that everyone's familiar with. And you see the little Arbitrum logo, as you alluded to. And as they said, you know, it starts on Arbitrum 1. It'll migrate over to the Robinhood chain when that thing is, you know, up and running. But also at the same time, Arbitrum 1 already has, you know, fantastic DeFi infrastructure, which the Robinhood chain will have to start from scratch on. I don't know if they're going to leave the option to do tokenized stocks on Robinhood Arbitrum 1 persistently. Will that always be an option?
AJ Warner:
[46:15] So it's a great question. It's really going to be up to them. I mean, the reason to do it is it's another environment where they can sort of integrate. They already have been integrated, so they don't have to uproot some of the existing established relationships that they might have on Arbitrum 1. The reason not to do it is fragmentation, potentially, of liquidity. So that's probably going to be a key product question that we're going to work on with their team over time. But, you know, I guess you said Arbitrum One has a really robust DeFi ecosystem. I'm sure a lot of our builders are going to want to work with them on the Robinhood chain as well, which is great. And something that, again, we encourage and support. I think that's probably like we don't know yet. We'll figure that out. Remember, on phase one, these assets aren't integrated yet into DeFi, right? So it's still more of a self-contained box. So today, if they migrated, they wouldn't have some of these sort of liquidity fragmentation concerns. It would probably just be some sort of mint and burn mechanism. But it probably depends on how mature and engrossed, or if there's demand for it.
David Hoffman:
[47:10] Sure, sure. You could just imagine that like there's a ton of potential TVL up for grabs. And, you know, if there's some inherent interoperability inside of the Arbitrum stack, maybe, I don't know, I can take my Robinhood tokenized stock and take it into GMX or Aave on side of Arbitrum 1. But that would necessitate transferability of these tokens. Now, you are not on the Robinhood team, so I don't know if you're privy to these details of the transferability of the Robinhood stock tokens. Do you know anything there?
AJ Warner:
[47:40] So, yeah, I don't want to speak for them. I think what Vlad was referring to is in the later phases that that isn't very much their intention. Like they want self-sovereignty. Like, so, for example, when you saw Vlad do that, like, live demo transfer, that was self-custody, right? That was not in the contained environment. Like he linked that to Arbiscan, he sent it to somebody else's wallet. So the infrastructure is already there, as they clearly showed. And I think what they're going to be planning on is, I think, figuring out the rollout. Like this is an extremely ambitious thing that they did today like yeah i think they made more announcements today than you typically see from companies in like a two or three year timeline like really incredible across so many different components but i think like again and this is sort of goes back to what i was saying about like what i really find so exciting about this they're really focused on crypto rails for their existing user base and they're going to focus on the product that will make sense for that user experience like when they were talking about the perps they said you can do this like two or three taps of the finger and like that's why i love working with this team right we're instead of saying how do we get crypto users to do more stuff on chain it's how do we get more people who are regular financial traders to be actually just using crypto rails and again i think robin hood is best positioned to be able to do that and we're extremely excited to work so closely with them when
David Hoffman:
[48:55] People are digesting this news they're just going to see the take that robin
David Hoffman:
[48:59] hood has a chain now and they're going to look at the correlates between Robinhood and Coinbase. And you're like, oh, Robinhood has their equivalent of base. And people are also going to look towards Arbitrum as well and compare that to Optimism and the OP stack. It's like, oh, Arbitrum has its equivalent of base now with Robinhood. But maybe you could also kind of continue that conversation and get into the nuances of the difference. How is it the same and how is it different? Yeah, so I.
AJ Warner:
[49:20] Think it's the same, obviously, in that we have a huge user base that's using the stack sort of exogenous to the sort of DAO-governed chain. And the reality is, is that as we see like WorldCoin, you know, Athena and Securitize are building Converge, also using the Arbitrum Orbit stack.
David Hoffman:
[49:39] There's plenty of demand for people to have their own chains.
AJ Warner:
[49:41] And that's really one of Ethereum's killer features is the flexibility and customization for that to happen. I think that there's two distinctions, I would say, sort of between the Arbitrum-Robinhood relationship. Two is like Robinhood, they have crypto users, but their core user base is not crypto. So the overlap between maybe Arbitrum 1 users and the people who are going to be the first users of the Robinhood chain are definitually probably going to be different. There's, of course, going to be on-chain activity happening from crypto natives on the Robinhood chain as well, I'm sure. But it's an additive user base. The second difference is, you know, I think especially with the expansion of time, like I think Coinbase and Optimus was probably a couple of years ago. Arbitrum 1 is very entrenched as, you know, I would argue the most credibly neutral liquid L2. Obviously, Coinbase and Base is huge. Just Arbitrum 1 and Coinbase are probably neck and neck in terms of different metrics. But Arbitrum 1 has a very strong home. if you're looking for a credibly neutral environment. And again, the way we've designed the Arbitrum path is if you want to launch an Arbitrum 1 and migrate to your own chain, it's seamless, right? That's what we're doing with Robinhood. That's what we're sort of pioneering. And I expect that journey to continue to happen for more people. Launch an Arbitrum 1, have a great experience, expand your user base, build yourself a mandate to be able to have your own chain, your own user base, and we're going to help work with you through that migration. So that's probably a little bit of the difference, but it's maybe a little more nuanced than some people might appreciate.
David Hoffman:
[51:07] I think this is going to keep people's attention focused on what exactly Robinhood is going to do on chain. How fast will the tokenized stocks come on chain? How fast will they spin up their own chain? What does Arbitrum growth look like downstream of all of this? How does Arbitrum keep this momentum going? What do you guys have next in the chamber to fire?
AJ Warner:
[51:25] Yeah, that's a great question. It's hard to beat this one, but I think that for us.
David Hoffman:
[51:29] You know, we've had a very,
AJ Warner:
[51:31] Very specific focus and thesis, which is we want to make sure our product can best serve our user base. And that user base is very broad, right? Like if you look at Arbitrum is probably most known for DeFi, both on Arbitrum 1 and also a lot of the chains that are launching using the stack. But also basically every gaming chain, for example, that launches uses Arbitrum 1. And the reason for that is because like we've had really fast block time. Sometimes you just want to use stylus because they might want to bring in traditional gaming libraries. So our goal is still like find use cases that we have conviction in. And, you know, I would say the highest conviction today is probably this merge of TradFi and DeFi into what Stephen, our CEO, likes to just say, finance. Like in 10 years, we're all just going to call it finance. That's probably our strongest focus right now, both on Arbitrum 1 and also across supporting ecosystems that want to launch their own chain. and just finding more use cases, right? We're very focused on, you know, traditional RWAs, lending, capital markets. You know, I would say Arbitrum doesn't do as well in the meme coin craze as other ecosystems. And, you know, every ecosystem sort of has their different communities and cultures,
AJ Warner:
[52:41] but this has kind of been always our focus. And during the DeFi bearer days, we probably went down with it. But, you know, as this is all coming back, I think Arbitrum's, the excitement, the euphoria for the ecosystem is coming back with it.
David Hoffman:
[52:54] Yeah, I do like that sentiment of like, you know, the OP mainnet are the governance philosophers and the base chain are like consumer crypto and crypto culture. And Arbitrum has always been DeFi and execution optimized. And so it makes sense that that's what Robinhood chooses because that's what their core product offering is. There's always there's been a there's a strong alignment between those two brands.
AJ Warner:
[53:17] Yeah, 100 percent. I think that people like to say like crypto and like TradFi or FinTech are that different. I don't think they are. I think there's a lot of cultural similarities, a lot of cultural elements. And it really all comes down to relationships, teams, and obviously product. And yeah, we've been, I think, very focused, I think, We've had a very product focused. I remember, you know, everyone talks about fast block times now. It's like the new hot thing. Arbitrum had sub 250 millisecond block times since 2021, right? And like for us, that was something we identified really early as going to be a critical thing to expand use cases. That's why Arbitrum did so well with perps as they sort of expanded off of Ethereum mainnet with, you know, GMX, Vertex, and others. And I think Stylus, which is not as popular today, is going to be that sort of next unlock. Just so in case your listeners aren't aware, Arbitrum's an EVM compatible chain, but Stylus enables you to launch contracts in Rust, C, C++, fully interoperable. So we're seeing a lot of teams now that like, you know, fintech is meeting crypto, privacy and privacy layers are really important on top of this. And Stylus enables you to have like privacy optimized because you can just pull in cryptographic libraries like super cheap, right? So we try and stay ahead of the ball in terms of what we think are the features that our users and developers are going to want and execute on that thesis.
David Hoffman:
[54:33] I do see privacy becoming increasingly important and discussed. It's starting to crescendo as a topic, especially as TradFi comes on and realizes like, oh, no, all of my assets are totally transparent to everyone. And so it's good to see that there is potential path for lots of the Arbitrum stack to also access some of the privacy that we so desperately need.
AJ Warner:
[54:54] 100%. We have like, for example, there's a team like when they launched on day one with stylus called renegade finance and it's essentially on-chain dark pools and it's the coolest thing and i think they have like more than 30 zk proofs generated on each transaction again they're doing it on arbitram it's a super cheap transaction because again they're utilizing stylus so we extended the evm we we recognized early the evm is the huge mode of the ethereum ecosystem but we can do more and that's like what the flexibility of l2s offers without compromising on the evm and we thought that you know stylus is a great a great combination there
David Hoffman:
[55:24] Cool aj Congratulations. It's been a very big day. Congratulations.
AJ Warner:
[55:27] Thank you.
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[55:31] Music