Robinhood (HOOD -1.14%), the online brokerage that popularized commission-free trades, launched its own blockchain, Robinhood Chain, on July 1. Robinhood wanted its investors to trade tokenized stocks on the blockchain, but meme coins dominated most of its early trading.
However, Robinhood's investors gradually pivoted toward tokenized stocks over the following weeks. According to DefiLlama, real-world assets (RWAs) on Robinhood Chain -- including tokenized stocks -- reached about $70 million by late July.
Image source: Getty Images.
The entire blockchain has more than tripled in size since mid-July, and a dozen tokenized stocks now exceed $500,000 in daily trading volume. The most popular tokenized stocks during the month included GameStop, Nvidia, and SpaceX, which had a combined trading volume of approximately $47 million. Could the growth of this blockchain be a game changer for Robinhood's stock?
Why are tokenized stocks better than traditional stocks?
When a stock is tokenized, it becomes a digital token on a blockchain, allowing it to be traded much faster than traditional stocks without any middlemen. Those tokens can be traded 24/7, easily split into fractional shares, seamlessly flow across international borders, and are easily integrated into decentralized finance (DeFi) applications through smart contracts.
Blockchains are also public ledgers that enable the secure, real-time audit of a tokenized stock's ownership and transaction history. Those features reduce the risk of settlement failures, administrative fraud, and hidden discrepancies.
NASDAQ: HOOD
Key Data Points
Why does Robinhood Chain widen Robinhood's moat?
Robinhood Chain bridges the gap between DeFi applications and traditional finance (TradFi) platforms. Larger brokerages and banks are also trying to bridge that gap with tokenized assets, but they're mainly dabbling in bonds and Treasuries rather than jumping straight into stocks.
Robinhood's early mover advantage in tokenized stocks could widen its moat against larger competitors. It also increases the stickiness of its ecosystem by locking its users into a single closed loop for trading stocks and cryptocurrencies, earning yields from tokens, and accessing decentralized apps without external wallets, bridges, or other crypto exchanges. Its tokenized stocks could help it reach more overseas users, who want to invest in U.S. stocks without going through expensive cross-border brokerages, and keep its trading momentum going around the clock even after the markets close.
Therefore, the growth of Robinhood Chain could be a game changer for the company and make it even more appealing than traditional brokerages over the long term. It could also support its expansion and evolution into a more diversified fintech and digital banking platform.
