Robinhood Markets, the commission-free brokerage that set retail trading ablaze during the pandemic, is moving to rekindle its popularity with its own crypto wallet.
The wallet is set to go live in beta today with 10,000 iOS customers, 1% of the 1 million-plus people around the world who have joined the waitlist since May.
The launch comes in the wake of Robinhood’s pandemic heyday, when the sleek and accessible interface of its app attracted swaths of young investors.However, as the market has cooled and turning a quick profit with stocks has become difficult, the appeal of Robinhood has waned.Today, the company’s stock is down 47% year-to-date and the app has lost 34% of monthly active users in the past year .Since coming public in July 2021, it has never turned a net profit, and sales in its most recent quarter were down 44% while average revenue per user slid 34% to $56.Despite its stumble from grace, Robinhood is sticking with its ethos of “democratizing finance for all” by offering a similarly accessible on ramp for customers new to crypto to access the network of blockchain applications which make up the hotly anticipated, highly debated, promised reincarnation of the internet known as web3.
“What we are trying to do is the same thing we did for stocks last time, where we remove the complexities,” says Johann Kerbrat, chief technology officer and general manager of Robinhood Crypto “We are going to do the same thing with web3, opening it to everybody and making it easy to use.”
For now, Robinhood Wallet exclusively supports the Polygon blockchain, but the company plans to add support for other networks.The wallet is self-custody, meaning that users’ private keys, analogous to passwords for the accounts holding crypto funds, are stored on their own devices rather than relying on a third party to hold them on their behalf.In April, Robinhood introduced an in-app crypto wallet that has since rebranded to crypto transfers.
The previous product was non-custodial and only allowed users to send and receive cryptocurrencies between Robinhood accounts.
From their Robinhood Wallet, which is a standalone app, users can trade and swap cryptocurrencies with no network fees.The transactions are routed through multiple market makers, which cover the network fees in order to win the bid, similar to payment for order flow in the stock market.
Typically, trading on decentralized exchanges can become expensive if the underlying blockchain is congested and network fees are high at the time of the trade.The swap feature is enabled through a partnership with liquidity aggregator 0x, which scans data across decentralized exchanges and market makers, then routes trades where the best price is found.0x also powers Coinbase’s marketplace for non-fungible tokens (NFTs).
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It is unclear if a decision around payment for order flow would extend to a similar model used across decentralized exchanges.
While the primary use for Robinhood Wallet will likely start off as trading tokens through decentralized exchanges, the number of people interested in having a crypto wallet is expected to grow as new blockchain applications become popular.
Currently, there are more than 37,000 decentralized applications built on Polygon alone, four times the number from the start of the year.
NFTs, which include digital art, and blockchain-based gaming are two industries bringing new demographics into crypto, and both require wallets to participate.Robinhood is looking to get ahead of the curve by creating a wallet that allows people to access decentralized applications, without the complexity currently involved.The crypto wallet is Robinhood’s first international product, offering an opportunity to broaden its customer base outside the U.S.
“At the end of the day we think web3 is here to stay,” Seong Seog Lee, head of product for Robinhood Crypto, says.
“We think the use cases and applications being built on web3 are going to be mainstream in the future.For now, we think decentralized trading is the biggest use case, but as our audience grows and as use cases grow, we want our wallet to be the primary way people are interfacing with web3, especially if you’re new to crypto.”
Robinhood clients can fund their wallets directly from existing accounts.New customers can either fund with tokens from another self-custody wallet or from a crypto exchange account.Robinhood does not charge withdrawal fees for crypto, but users have to pay network fees to move their tokens on-chain.It will be possible for users to store NFTs and connect to NFT marketplaces when Robinhood Wallet launches for the general public, but the feature is not available while the product is in beta.
Emily Mason.
