Written by: Thejaswini MA

Translated by: Baihua Blockchain

A war is quietly unfolding in your pocket, and most people are completely unaware.

Two major financial applications in the United States—Robinhood and Coinbase—are conducting entirely opposite experiments on millions of users. Robinhood ranks 14th in the App Store's finance category, while Coinbase ranks 20th, with both companies valued at around $80 billion. They both target young investors but believe the other's approach is completely wrong.

Both experiments have been successful to some extent.

The Essence of Robinhood and Coinbase

These two companies are not traditional competitors; rather, they are conducting different experiments on the same subject (us).

Robinhood identified the pain points in finance and proposed, "What if we fix all the annoying parts?" They offer 15 types of cryptocurrencies, zero-commission trading, and an interface that allows you to buy Tesla stock without a finance degree. Their philosophy is: you don’t need to know how sausages are made to enjoy a hot dog.

Coinbase, on the other hand, takes the opposite approach, asking, "What if we rebuild the entire financial system on blockchain technology?" Coinbase charges more than competitors like Robinhood but creates a platform for users who want comprehensive exposure to the crypto ecosystem, offering over 260 cryptocurrencies. They bet that traditional finance will eventually go on-chain and hope to become the infrastructure for this transformation.

Coinbase CEO Brian Armstrong stated, "In the next 5 to 10 years, our goal is to become the leading financial services application globally because we believe cryptocurrency is consuming financial services, and we are the number one crypto company. All asset classes—money market funds, real estate, securities, debt—will go on-chain."

Both companies went public a few months apart in 2021, each valued at $80 billion, targeting mobile-first young investors, yet their products seem designed for different species.

This is not a war for dominance but a race to serve different financial futures.

The Race for Crypto Product Expansion

Both companies are rapidly expanding their crypto products, but in entirely different ways.

Recent announcements from Robinhood indicate they are trying to directly surpass Coinbase. In June, they launched Robinhood Chain—its own Layer-2 network that supports tokenized stocks and crypto trading, with plans to support assets raised by SpaceX and OpenAI in the future. European users can now trade tokenized U.S. stocks around the clock, rather than just during market hours. This is the 24/7 trading model that crypto users expect, applied to traditional assets.

They also introduced crypto staking for ETH and SOL, acquired Bitstamp, Europe’s oldest crypto exchange (for $200 million), and plan to launch crypto perpetual futures for European users. The crypto infrastructure they are building seamlessly integrates with the existing stock trading experience, rather than simply tacking on crypto features to traditional brokerage services.

All of this—chains, tokenized stocks, low fees—is designed for the next generation of investors who will inherit trillions of dollars in wealth.

In the fee war, Robinhood's crypto trading fees are about 40 basis points (0.4%), while Coinbase's equivalent trades can be as high as 1.4% or more. Buying $1,000 worth of Bitcoin costs Robinhood about $4, while Coinbase charges over $14.

Robinhood profits through order flow payments, where market makers pay fees to execute retail trades, similar to their stock trading model. This mature model allows them to offer "free" trading while still making money.

However, Coinbase offers features that Robinhood cannot match: true ownership of cryptocurrencies. When you buy crypto on Robinhood, you are purchasing a "receipt" for the crypto, merely a record of what Robinhood owes you in crypto assets. You cannot transfer Bitcoin to your own wallet or use it elsewhere; you can only buy and sell within the Robinhood app. You cannot participate in DeFi, stake most tokens, or use cryptocurrencies for purposes other than buying and selling.

For most people, this doesn’t matter; they just want exposure to cryptocurrencies rather than practicality. But for users looking to engage in complex crypto operations, Coinbase is the only realistic choice among major platforms in the U.S.

Q2 Financial Report Analysis

This summer's financial reports reveal the effectiveness of the two approaches.

Robinhood performed impressively. Total revenue grew 45% year-over-year to $989 million. Crypto revenue surged 98% to $160 million (increasing from 10% of total revenue last year to 16% this quarter), despite the overall crypto market being relatively stable. They have 26.5 million active accounts, managing $279 billion in assets, a 99% year-over-year increase. The acquisition of Bitstamp added about 520,000 crypto users, with Bitstamp generating $7 billion in nominal crypto trading volume after the acquisition was completed in June.

Platform assets reached $279 billion, a 99% year-over-year increase, with net deposits of $13.8 billion. Active accounts grew 10% to 26.5 million, and cash balances surged 56% to $32.7 billion, indicating an increase in customer wallet share.

Coinbase, on the other hand, experienced a "difficult quarter." Total revenue fell 26% from Q1 to $1.5 billion, missing analyst expectations. Trading revenue dropped 39% due to a decline in retail trading. The stock price fell 16% on the day of the earnings report as investors tried to determine whether this was a temporary slump or a signal of a high-fee model.

However, calling this quarter a failure overlooks the bigger picture. Coinbase achieved a net income of $1.4 billion, exceeding $512 million in adjusted EBITDA, primarily due to $1.5 billion in unrealized gains from its portfolio and strategic crypto asset holdings. Even excluding these one-time gains, adjusted net income was still $33 million, demonstrating actual profitability.

Increased operating expenses were mainly due to a one-time loss of $307 million from a data breach in May. Core costs (technology, administration, marketing) actually decreased, showing cost control capabilities. Revenue from the USDC stablecoin business reached $332 million, with average balances growing 13%. Custodial assets hit a record high of $245.7 billion. Prime Financing (institutional financing) balances also reached a new high, which is part of Coinbase Prime, providing custody, trading, borrowing, and financing services to hedge funds, family offices, and more.

Coinbase continues to launch new products: new derivatives, expansion of the Base chain, and the introduction of the Coinbase One Card. Despite the revenue decline, the foundation remains solid.

Coinbase's Infrastructure Empire

Coinbase's infrastructure strategy is more complex. They provide custody for $245.7 billion in assets for institutions, capturing a significant share of the institutional crypto market. When you buy a Bitcoin ETF through a 401k, you are likely using Coinbase's infrastructure.

Coinbase is the primary custodian for over 80% of Bitcoin and Ethereum ETFs in the U.S., managing about $113.4 billion (out of a total of $140 billion in crypto ETFs). When BlackRock's IBIT or Fidelity's FBTC needs to store billions in Bitcoin, they turn to Coinbase. When PayPal launches the PYUSD stablecoin or JPMorgan needs a crypto payment rail, they also use Coinbase's backend.

Coinbase has over 240 institutional clients, more than 420 liquidity providers, and regulatory licenses that most competitors cannot match. Its custody business is licensed by the New York State Department of Financial Services, a regulatory approval that takes years to obtain and is difficult for competitors to replicate.

Its "all-in-one trading platform" strategy is beginning to show results. They have launched perpetual futures with up to 10x leverage, bringing derivatives trading previously only available on overseas platforms to U.S. retail users. They have integrated decentralized trading platforms directly into the app, allowing users to trade any token on Ethereum or Base without leaving Coinbase.

Their Base Layer-2 network processes over 54,000 token issuances daily, surpassing Solana. The real highlight of Base lies in its integration with Coinbase's other services: ETF providers can use it for instant settlement, businesses can directly tokenize assets, and retail users can access institutional-grade infrastructure.

Robinhood's Generational Takeover

While Coinbase builds infrastructure for institutions, Robinhood executes the smartest long-term strategy in finance: capturing young people before they become wealthy.

A similar strategy brought success to Disney. In the early 20th century, Disney captured the hearts of children through animation and theme parks, establishing emotional connections before they had money. When these children grew up and started earning, their loyalty translated into spending on movies, merchandise, streaming, and vacations, creating a cash machine for generations.

Robinhood dominates among young investors, and traditional brokers should be concerned:

About 50% of its customers are millennials, 25% are Gen Z, and 20% are Gen X.

Robinhood users typically start investing at ages 19-22, significantly younger than users on other platforms, where millennials start in their 20s and baby boomers in their 30s.

Robinhood guides new users to quickly complete their first sell order, not to encourage frequent trading, but because locking in actual gains (even just $50) creates an emotional hook that keeps users coming back.

Its "all-financial" expansion aligns with this logic. Robinhood Gold (a $5 monthly subscription) includes a 3% cash-back credit card, high-yield savings, retirement matching, and margin discounts. Gold subscribers grew 60% year-over-year to 2 million. These users utilize Robinhood for banking, credit cards, and retirement.

The platform currently manages $279 billion in assets, targeting the massive wealth transfer of $84-124 trillion from the baby boomer generation to younger generations over the next 20 years. Robinhood bets that if it can establish user habits early, it won't need to predict wealth inheritance patterns; it just needs to secure a place when the wealth arrives.

Who is Winning?

The market capitalizations of the two companies are close: Robinhood at $81 billion and Coinbase at $85 billion. In terms of performance this year, Robinhood has risen 135%, while Coinbase has only increased by 30%, with much of that coming in the last month.

Bank of America analyst Craig Siegenthaler recently raised Robinhood's target price to $119, while lowering Coinbase's from $383 to $369, stating: "Robinhood's crypto revenue is surging, while Coinbase is overly reliant on the volatile altcoin trading that retail users are abandoning."

Coinbase's global market share has dropped from 5.65% to 4.56%, with a slight rebound in July, while Kraken has seen the most significant growth in market share in the U.S. this year. Coinbase faces a dilemma: lowering fees harms profit margins, or sticking to high fees risks losing traders. They have chosen to prioritize profit margins, adding fees to previously free stablecoin trading, while Robinhood's rates are about 50% lower.

Mizuho reaffirmed a $120 target price after meeting with Robinhood CEO Vlad Tenev, praising its crypto resilience and aggressive push for tokenized stocks. They stated: "The opportunities in European tokenized stocks, expansion into upstream and youth markets, 15% of net deposits coming from competitors, focus on NPS and execution, and the inelasticity of crypto prices are all impressive."

However, Coinbase has institutional credibility. While other trading platforms compete on trading fees, Coinbase builds relationships with institutions that will determine the integration of crypto and traditional finance over the next decade.

Neither company will disappear. They meet different user needs, and both demands are growing. This is not a winner-takes-all competition; it is more like market segmentation—Robinhood targets mainstream finance, while Coinbase focuses on crypto infrastructure.

This reveals two competing theories about how people will interact with money in the future:

Robinhood believes the future of finance will be "invisible," abstract, simple, and integrated into lifestyle applications, making finance a part of the environment.

Coinbase bets on winning trust through architecture.

Neither side is right or wrong; they simply have different goals. One seeks simplicity and trust, while the other builds underlying infrastructure.

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