Written by: Aiying Compliance

On June 30, 2025, Robinhood's stock price surged over 12% during trading, reaching an all-time high. The market frenzy was not solely due to an impressive earnings report, but stemmed from a series of significant announcements made at the Cannes event in France: the launch of stock tokenization products, the establishment of a self-built Layer 2 blockchain based on Arbitrum, and the provision of perpetual contracts for EU users. This series of actions signifies a fundamental shift in market perception—Robinhood is no longer just a "retail trading app" for young people; it is attempting to become a potential "disruptor of financial infrastructure."

The Aiying team is a compliance consulting group with practical experience in legal and operational matters, deeply understanding the balance between industry regulatory compliance and actual business models. This article primarily explores how Robinhood's business model has evolved. How will its current strategic core—especially its deep layout in RWA (Real World Assets) and cryptocurrency technology—reshape its own value and have profound impacts on traditional financial markets and the cryptocurrency industry? This article will analyze the evolution of its business model and the logic of its core strategy from the three dimensions of Robinhood's "yesterday, today, and tomorrow," and deduce its future influence on the industry market.

I. Yesterday: The Wild Growth and Transformation Pain from "Zero Commission" to "Diversification"

This section aims to quickly review Robinhood's rise and the initial construction of its business model, providing context for understanding its current strategic transformation.

1. Founding Intent and User Positioning

The story of Robinhood began with two founders from Stanford University with backgrounds in physics and mathematics—Baiju Bhatt and Vladimir Tenev. Their experience developing low-latency trading systems for hedge funds made them realize that technology serving institutions could also serve retail investors. As symbolized by its company name "Robinhood," their original intention was "financial democratization," aiming to provide ordinary people with the same investment opportunities as institutions. This idea resonated precisely with the millennial generation's distrust of big banks following the 2008 financial crisis.

They seized the wave of mobile internet and launched a mobile-designed app in 2014. Its two disruptive innovations were:

• Zero-commission trading: Completely broke the traditional brokerage fee model, significantly lowering the investment threshold.
• Exceptional user experience: A simple and even "addictive" interface design, such as the confetti animation after a trade is completed, gamified complex financial transactions, attracting a large number of inexperienced young investors.

With this precise positioning, when Robinhood officially launched in 2015, there were already 800,000 users on the waiting list, rapidly achieving viral growth and ushering in an era for young investors.

2. Establishment and Controversy of Core Business Model

"Zero commission" is not a free lunch; behind it is Robinhood's carefully constructed diversified revenue model, the most representative and controversial of which is PFOF.

PFOF (Payment for Order Flow)

PFOF is the cornerstone of Robinhood's "zero commission." In simple terms, Robinhood does not send users' orders directly to exchanges but packages them and sells them to high-frequency trading market makers like Citadel Securities. Market makers earn small profits from the bid-ask spread and pay a portion back to Robinhood as compensation. According to research reports, in the second quarter of 2024, Robinhood held about 20% of the stock PFOF market and an absolute advantage of 35% in the options PFOF market. This model has brought substantial revenue but has also sparked long-term regulatory controversy, primarily regarding whether it sacrifices users' best execution prices for its own benefit.

Exploration of Business Diversification

Building on PFOF, Robinhood continuously expanded its business landscape, establishing three major revenue pillars:

• Trading business: From the initial stock trading, it quickly expanded to options (2017) and cryptocurrencies (2018). Data shows that these two high-volatility assets contributed far more trading revenue than stocks, reflecting its user base's preference for high-risk, high-reward investments.
• Interest income: By launching margin loans and cash management services, Robinhood transformed users' idle funds and leverage needs into stable interest income in a high-interest environment, becoming its second-largest source of revenue.
• Subscription services: The Robinhood Gold subscription service launched in 2016 offers value-added features such as instant deposits and pre-market and after-hours trading. By the first quarter of 2025, Gold users had exceeded 3.2 million. This marks Robinhood's preliminary transformation from a pure trading platform to a "financial SaaS" model that enhances user stickiness and revenue stability.

3. Growing Pains: Crises and Reflections

Wild growth inevitably comes with growing pains. Robinhood's development history is filled with various crisis events:

• Technical and risk control crises: In March 2020, on a historic day of soaring U.S. stocks, the Robinhood platform crashed all day, leading to a collective lawsuit from users. In the same year, a 20-year-old user committed suicide due to a misunderstanding of his options account balance, exposing the severe lack of user education and risk warnings behind its "gamified" interface.
• GME incident and trust crisis: The GameStop incident in early 2021 marked a turning point for its reputation. At the peak of the retail battle against Wall Street, Robinhood suddenly restricted users from buying popular stocks like GME, being accused of "pulling the plug" and betraying retail investors. Although the official explanation was to meet the clearinghouse's margin requirements, the label of "stealing from the poor to give to the rich" has deeply etched itself into its brand, shaking its original intention of "financial democratization."
• Ongoing regulatory pressure: From fines imposed by FINRA over PFOF issues to SEC investigations into its cryptocurrency business, regulation has always loomed over Robinhood like the sword of Damocles.

These crises collectively exposed Robinhood's vulnerabilities: unstable technology platform, flawed risk control mechanisms, and potential conflicts between its business model and user interests. It is these profound growing pains that compel Robinhood to seek new growth stories and strategic directions to shed the label of "Meme stock paradise" and rebuild market trust.

II. Today: All in Crypto—Robinhood's Strategic Ambition and Business Logic

This section is the core of the article, delving into Robinhood's current strategic layout centered on RWA and cryptocurrency technology, dissecting the underlying business logic and competitive advantages.

1. Core of Strategic Shift: Why RWA and Stock Tokenization?

Robinhood's future bet on RWA and cryptocurrency technology is not a spur-of-the-moment decision but is based on profound financial drivers and strategic considerations.

"We have the opportunity to prove to the world what we have always believed: cryptocurrency is far more than a speculative asset. It has the potential to become a cornerstone of the global financial system." — Vladimir Tenev, Robinhood CEO

Financial Drivers: The Core Engine of Profit

According to financial reports, the cryptocurrency business has become Robinhood's most profitable segment. In the first quarter of 2025, cryptocurrency trading contributed $252 million in revenue, accounting for 43% of total trading revenue, surpassing options for the first time as the largest source of trading income. More importantly, its astonishing profit margins indicate that the market-making rebate rate for cryptocurrency order flow is 45 times that of stocks and 4.5 times that of options. Driven by both growth and profitability, "All in Crypto" has become an inevitable choice.

Narrative Upgrade: From Broker to "Bridge"

This move helps Robinhood upgrade from a controversial "retail broker" to a "bridge connecting traditional finance (TradFi) with the on-chain world." This not only effectively sheds the regulatory shadow of PFOF and the cyclical label of "Meme stocks," but also aims to tap into a trillion-dollar market far larger than its existing business—digitizing and tokenizing the vast assets of the real world.

Core Objective: Disrupting Traditional Financial Infrastructure

In a letter submitted to the U.S. Securities and Exchange Commission (SEC), Robinhood clearly articulated its vision for RWA tokenization. They believe that utilizing blockchain technology can achieve: this vision aims to fundamentally disrupt the inefficiencies, high costs, and barriers to entry of the existing securities trading system.

• 24/7 trading: Breaking the time barriers of traditional exchanges.
• Near-instant settlement: From T+2 to T+0, significantly reducing counterparty risk and operational costs.
• Unlimited ownership fragmentation: Allowing high-value assets (such as real estate and art) to be fragmented, lowering investment thresholds.
• Enhanced liquidity: Creating broader markets for traditionally illiquid assets (such as private equity).
• Automated compliance: Embedding regulatory rules through smart contracts to reduce compliance costs.

2. "Trinity" Strategic Combination: How to Achieve Goals?

To achieve this grand goal, Robinhood has rolled out a "trinity" strategic combination, descending from the application layer to the infrastructure layer.

Stock Tokenization (Stock Token)

This is the "door opener" for its RWA strategy. By launching U.S. stock tokens in the EU market, allowing users to trade 24/5 and receive dividend support, Robinhood is conducting a large-scale market education and technology validation. This move aims to bridge traditional assets with the on-chain world, enabling users accustomed to traditional investments to smoothly enter the crypto ecosystem.

Self-built L2 Public Chain (Robinhood Chain)

This is its most strategically ambitious step. By building a proprietary Layer 2 blockchain optimized for RWA based on the Arbitrum Orbit technology stack, Robinhood is transforming from an "application" into an "infrastructure provider." Having its own public chain means mastering the rule-making power and dominating the ecosystem. In the future, the issuance, trading, and settlement of all tokenized assets will be completed within this closed-loop ecosystem, thereby constructing a strong technological and business moat.

Platformization (Broker-as-a-Platform)

Through a series of acquisitions (such as Bitstamp and WonderFi) and product launches (such as perpetual contracts, staking services, AI investment advisor Cortex, and credit card cashback for purchasing cryptocurrencies), Robinhood is building a "crypto-driven all-in-one investment platform." This platform integrates trading, payment, asset management, and infrastructure, covering the entire lifecycle of users from deposit, trading to asset appreciation, aiming to maximize the lifetime value (LTV) of individual users.

3. Comparative Analysis: Robinhood vs. Coinbase & Traditional Brokers

Robinhood's strategic positioning places it in a unique position within the competitive landscape.

vs. Coinbase

• Path Differences: Coinbase is a "chain-based exchange," with its core focused on serving crypto-native assets and gaining institutional trust through compliance pathways. In contrast, Robinhood is a "chain-enabled broker," aiming to "chainify the old world" by bringing vast traditional assets onto the chain.
• Advantage Comparison: Coinbase's advantages lie in its deep roots in the crypto industry, compliance depth, and institutional client base. Robinhood's strengths are its large retail user base, exceptional product experience, and a more aggressive and focused RWA strategy.

vs. Traditional Brokers (Schwab, IBKR)

• Model Differences: Traditional brokers like Charles Schwab (Schwab) and Interactive Brokers (IBKR) primarily serve high-net-worth and institutional clients, with revenue more reliant on interest and advisory services. Robinhood, on the other hand, serves younger, more active retail traders, with revenue more dependent on trading commissions (especially in cryptocurrencies).
• Data Comparison: According to third-party statistics, Robinhood has surpassed Schwab in account numbers by over two-thirds, but the average assets per account (AUC) are only about 2% of Schwab's. This is both a shortcoming and a growth opportunity for the future. Its current offerings of IRA retirement accounts and credit cards are aimed at increasing user asset scale and stickiness, attacking the traditional broker's territory. In terms of trading revenue, especially in cryptocurrency trading revenue growth, Robinhood has far outpaced traditional brokers.

III. Tomorrow: The "First Entry Point" for Reshaping Financial Order? Opportunities and Risks Coexist

Based on the previous analysis, Aiying evaluates Robinhood's future, assessing its potential market impact and the challenges it faces.

1. Potential Impact on Financial Market Landscape

• Squeezing Altcoin Liquidity: When investors can trade blue-chip tokenized stocks (such as OpenAI and SpaceX) with real value support on a compliant and convenient platform, the demand for high-risk, fundamentally weak altcoins and meme coins may be significantly diverted. The future crypto market may further differentiate into "mainstream coins through ETFs" and "infrastructure coins that can link to traditional finance," with many altcoins potentially losing their relevance.
• Reshaping Stock Trading Rules: 24/7 trading will completely break the pre-market and after-hours restrictions of traditional exchanges, profoundly impacting global liquidity distribution, price discovery mechanisms, and even market maker strategies. In the future, "Should we look at Nasdaq pre-market or Robinhood?" may shift from a joke to a real question.
• Accelerating Entry of TradFi Giants: Robinhood's aggressive layout will act as a "catfish," stirring the entire traditional financial industry. Its exploration will force traditional giants like JPMorgan and Goldman Sachs to accelerate their layouts in the asset tokenization field, triggering a new round of fintech arms race.

2. Opportunities and Valuation Reconstruction for Robinhood

If the strategy succeeds, Robinhood will face tremendous development opportunities.

Becoming the "First Entry Point" for RWA: With its large user base and leading product experience, Robinhood has the potential to become a core hub connecting trillions of dollars of real-world assets with the crypto ecosystem. It will simultaneously capture the dual era dividends of "intergenerational wealth transfer" (with $84 trillion in assets shifting from the baby boomer generation to millennials) and "Crypto Adoption" (the popularization of crypto technology).

Valuation Anchor Shift: Its valuation logic is undergoing a qualitative change. It is no longer a purely cyclical broker influenced by trading volume and interest rates, but a composite company with attributes of SaaS (Gold subscription), fintech (platform effects), and infrastructure (public chain value). This multidimensional business model will greatly expand its growth ceiling, and the market will adopt a new model for its valuation.

3. Inescapable Risks and Challenges

Robinhood's grand blueprint is not without obstacles, as it still faces three core challenges:

• Regulatory Uncertainty: This is the biggest bottleneck for its strategic realization. In its letter to the SEC, it clearly pointed out many obstacles under the current regulatory framework, such as: how to define the legal attributes of RWA tokens? How can brokers meet the custody rules for digital assets (such as Rule 15c3-3)? How to calculate the capital requirements for digital assets (Rule 15c3-1)? Although the current political climate in the U.S. seems more favorable to the crypto industry, any changes in regulatory policy could pose a fatal blow to its business.
• Execution and Competition Risks: Plans to build a self-owned L2 public chain, integrate Bitstamp, and achieve global expansion test Robinhood's strong project management and execution capabilities at every step. Meanwhile, competition from crypto-native rivals like Coinbase and Kraken, as well as awakened traditional financial giants like Goldman Sachs and JPMorgan, will be exceptionally fierce. "Who executes is the key to life and death," Robinhood must prove that it not only has good ideas but also the ability to realize them.
• Inherent Vulnerability of the Business Model: Despite increasing diversification, its revenue structure will still heavily rely on high-volatility trading businesses, especially cryptocurrencies, in the short term. This means its performance will still be significantly influenced by market cycles. How to establish more robust and predictable revenue sources while pursuing disruptive innovation is key to achieving long-term healthy development.

Conclusion: A New and Old Financial Derivative Blueprint in the Making

Looking back at Robinhood's journey, it is no longer just a "retail toy" that attracted attention solely through "zero commission" and "gamification." It is attempting to move from the periphery of the financial system to the center through a gamble centered on RWA and crypto technology, becoming a "system designer" and "infrastructure provider" at the intersection of new and old financial orders.

What it aims for is no longer just superficial functions like 24-hour trading and instant settlement, but the underlying reconstruction of the entire asset issuance, trading, and settlement system—transforming the closed, expensive, and inefficient rules of traditional finance into a new financial logic that is open, programmable, and composable.

The success or failure of this transformation will not only determine Robinhood's fate but will also significantly influence the evolutionary path of global financial markets over the next decade. For investors and market observers, Robinhood is no longer just a stock ticker but a "derivative blueprint" full of infinite possibilities for observing the future of financial forms. Volatility will continue to exist, and the space for institutional arbitrage has just begun to open.

Financial Report: https://www.globenewswire.com/news-release/2025/04/30/3071835/0/en/Robinhood-Reports-First-Quarter-2025-Results.html

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