Why Is Robinhood Building on Arbitrum Instead of Solana?

Robinhood is making its biggest bet on crypto yet, announcing on Monday that it’s developing an Ethereum layer-2 scaling network for trading digital representations of assets like stocks, while similar products exist already on competing networks like Solana.

For Johann Kerbrat, Robinhood’s crypto general manager, the existence of multiple projects is frustrating. Tokenization becomes less beneficial when a digital version of the same stock is issued across multiple networks beneficial because activity is siloed across ecosystems, he told Decrypt. 

“I hate the idea of having a Tesla-Kraken token and a Tesla-Robinhood token,” he said. “Instead of actually moving forward and creating a better financial system, we’re splitting [up] liquidity.”

Robinhood’s initiative highlights stark differences between major crypto trading platforms as they use tokenization to break from traditional methods of record keeping and create more efficient systems for investors. 

In developing its own Ethereum-compatible network, based on Arbitrum’s design, Kerbrat said that Robinhood is trying to cast as large a net as possible, as it looks to expand on tokenized assets and connect with other entities within the cryptosphere.

“We’re launching [tokenized stocks and ETFs] first in the EU, but in the future, [we] want to open it up as soon as we get clarity on regulations,” he said. “We want the maximum participation there. We want to be compatible with other players.”

But crypto exchanges Kraken and Bybit have rolled out tokenized stock trading through Backed Finance’s xStocks. The assets, which trade on Solana, underscore how companies are leveraging competing networks and standards in trying to give the financial system a facelift.

As Kraken pushes forward with tokenized stock trading on Solana, Kerbrat noted that Ink, an Ethereum layer-2 network released by Kraken last year, has gone untapped.

“It’s interesting to see that they decided to not use that chain,” he said. “Some companies are about launching as many things as possible to get as many headlines as possible. On our side, we actually want people to use a product.”

A Kraken spokesperson told Decrypt that it joined the xStocks Alliance, a group of exchanges, networks, and decentralized finance protocols setting standards for on-chain assets, to avoid fragmenting liquidity across multiple token standards and chains.

“We’re working to make xStocks the global standard for tokenized equities,” the spokesperson said. “This isn’t about promoting any single brand—it’s about unlocking access and shifting power back to the people.”

Solana was a natural place to launch xStocks to “accelerate mass adoption,” but Kraken is already working with a “broad network of partners” to expand xStocks to additional blockchains, the spokesperson said. Ink is a key part of the company’s roadmap, they added.

As Kraken leans into xStocks, Robinhood is preparing to debut its own Ethereum layer-2 scaling network, with the intent of appealing to as many developers as possible, too.

In Cannes, Robinhood CEO Vlad Tenev said during an event on Monday that the firm is working with regulators to “bring the entire Robinhood ecosystem on-chain,” eventually leveraging its own blockchain for trading and settlement and supporting financial applications.

During a fireside with Ethereum co-founder Vitalik Buterin and Offchain Labs CSO A.J. Warner, Kerbrat later highlighted Arbitrum Stylus. As an engineer, he noted how difficult it can be to find “great engineers” that are adept in Ethereum’s programming language.

Arbitrum Stylus, which debuted in September, allows developers to write smart contracts in a variety of languages, including Rust, the primary language from programs on Solana. 

“You can pull in specific libraries or specific components of your application using the Stylus stack and still take the benefits of the battle-hardened EVM code,” Warner said, noting that languages like c++ may appeal more to game developers or traditional finance firms.

Edited by James Rubin