Author: Thejaswini MA; Source: thetokendispatch; Compiler: Plain Language Blockchain
A war is quietly unfolding in your pocket, and most people aren't even aware of it.
Two major US financial apps—Robinhood and Coinbase—are conducting diametrically opposed experiments on millions of users. Robinhood ranks 14th in the App Store's Finance category, while Coinbase ranks 20th, with each having a market capitalization of approximately $80 billion. Each is targeting young investors, but they believe the other's approach is completely wrong.
Both experiments have been successful to some extent.
The Nature of Robinhood and Coinbase
These two companies aren't competitors in the traditional sense, but rather are conducting different experiments on the same subjects: us.
Robinhood saw the pain points of finance and asked, "What if we fixed all the annoying parts?" They offer 15 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 to make sausages to eat hot dogs.
Coinbase took the opposite approach, asking, "What if we rebuilt the entire financial system on blockchain technology?" Coinbase charges higher fees than competitors like Robinhood, but creates a platform for users who want to fully access the crypto ecosystem, offering more than 260 cryptocurrencies. They are betting that traditional finance will eventually be put on the blockchain and hope to become the infrastructure for this transformation. Coinbase CEO Brian Armstrong said: "Over the next five to ten years, our goal is to become the world's leading financial services application because we believe cryptocurrency is eating financial services, and we are the number one crypto company. All asset classes—money market funds, real estate, securities, debt—will be on the blockchain." The two companies went public a few months apart in 2021, each with a market capitalization of $80 billion. Both target young, mobile-first investors, but their products seem designed for different species. This is not a battle for dominance, but a competition to serve different financial futures. The Race for Crypto Product Expansion Both companies are accelerating the expansion of their crypto products, but in very different ways. Robinhood's recent announcement suggests that they are attempting to directly surpass Coinbase. In June, they launched Robinhood Chain, their own Layer-2 network, supporting tokenized stocks and crypto trading, and will soon support assets raised by companies like SpaceX and OpenAI. European users can now trade tokenized US stocks 24/7, not just during market hours. This represents the 24/7 trading model crypto users have come to expect, applied to traditional assets. They also launched 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. They're building crypto infrastructure that seamlessly integrates with the existing stock trading experience, rather than simply grafting crypto functionality onto traditional brokerages. All of this—chain, tokenized stocks, and low fees—is designed for the next generation of investors who will inherit trillions of dollars. Amidst the fee war, Robinhood crypto trading fees are around 40 basis points (0.4%), while comparable transactions on Coinbase can be 1.4% or higher. Robinhood charges about $4 to buy $1,000 in Bitcoin, while Coinbase charges over $14. Robinhood profits through payment for order flow, where market makers pay fees for executing retail trades, similar to its stock trading model. This established model allows them to offer "free" trading and still make money. But Coinbase offers something Robinhood can't match: true cryptocurrency ownership. On Robinhood, you buy a cryptocurrency "IOU," simply a receipt that Robinhood owes you the crypto asset. You can't transfer Bitcoin to your own wallet or use it elsewhere; you can only buy and sell it within the Robinhood app. You can't participate in DeFi, stake most tokens, or use cryptocurrency for anything other than buying and selling. For most people, this doesn't matter; they just want cryptocurrency exposure, not utility. But for users who want to conduct sophisticated crypto operations, Coinbase is the only realistic option among the major US platforms. Q2 Earnings Analysis This summer's earnings report reveals the success of both approaches. Robinhood's performance was impressive. Total revenue increased 45% year-over-year to $989 million. Crypto revenue surged 98% to $160 million (from 10% of total revenue last year to 16% this quarter), despite a relatively flat overall crypto market. Robinhood boasts 26.5 million active accounts and $279 billion in assets under management, a 99% year-over-year increase. The acquisition of Bitstamp added approximately 520,000 crypto users, generating $7 billion in notional crypto trading volume following the June acquisition. 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, demonstrating a strengthening of customer wallet share. Coinbase experienced a difficult quarter. Total revenue fell 26% from Q1 to $1.5 billion, missing analyst expectations. Trading revenue fell 39% due to a decline in retail trading. The stock price fell 16% on earnings day as investors tried to determine whether this was a temporary downturn or a sign of a high-fee model. However, calling the quarter a failure misses the full picture. Coinbase achieved $1.4 billion in net income, exceeding $512 million in adjusted EBITDA, primarily due to $1.5 billion in unrealized gains on its investment portfolio and strategic crypto asset holdings. Even excluding these one-time gains, adjusted net income still reached $33 million, demonstrating actual profitability. The increase in operating expenses was primarily due to a one-time loss of $307 million from the May data breach. Core costs (technology, administration, and marketing) actually decreased, demonstrating cost control. USDC stablecoin revenue reached $332 million, with average balances increasing by 13%. Assets under custody reached a record high of $245.7 billion. Prime Financing (institutional financing) balances also reached a new high. This is part of Coinbase Prime, which provides custody, trading, lending, and financing services to hedge funds, family offices, and others. Coinbase continues to launch new products: new derivatives, the expansion of the Base Chain, and the launch of the Coinbase One Card. Despite the revenue decline, the foundation remains solid. Coinbase's Infrastructure Empire Coinbase's infrastructure strategy is even more complex. They hold $245.7 billion in institutional assets under custody, representing a significant share of the institutional crypto market. If you buy a Bitcoin ETF through your 401k, it's likely using Coinbase infrastructure. Coinbase is the primary custodian for over 80% of US Bitcoin and Ethereum ETFs, managing approximately $113.4 billion (out of the $140 billion in total crypto ETF assets). When Blackstone's IBIT or Fidelity's FBTC need to store billions of Bitcoin, they turn to Coinbase. When PayPal launches its PYUSD stablecoin or JPMorgan Chase needs crypto payment rails, they also use Coinbase's backend. Coinbase boasts over 240 institutional clients, over 420 liquidity providers, and regulatory approvals unmatched by most competitors. Its custody business is chartered 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 exchange" strategy is beginning to bear fruit. They launched perpetual futures with up to 10x leverage, bringing derivatives trading, previously only available on overseas exchanges, to US retail users. They integrated their decentralized exchange directly into their app, allowing users to trade Ethereum or any token on Base without leaving Coinbase. Their Base Layer-2 network processed over 54,000 token issuances in a single day, surpassing Solana. Base's true strength lies in its integration with Coinbase's other businesses: ETF providers can use 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 is executing one of finance's smartest long-term strategies: capturing young people before they become wealthy. A similar strategy has proven successful for Disney. In the early 20th century, Disney captivated children through animation and theme parks, building an emotional bond before they had money. When these children grew up and began earning money, their loyalty translated into spending on movies, merchandise, streaming services, and vacations, creating a multi-generational cash machine. Robinhood's dominance among young investors should be a cause for concern for traditional brokerages: approximately 50% of its clients are millennials, 25% are Gen Z, and 20% are Gen X. The average age of Robinhood users starting investing is 19-22, significantly lower than the average age of millennials in their 20s and baby boomers in their 30s on other platforms. Robinhood guides new users through their first sell order quickly, not to encourage frequent trading, but because locking in a tangible profit (even if it's just $50) creates an emotional hook that keeps users coming back. Its "full finance" 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 use Robinhood for banking, credit cards, and retirement. The platform currently manages $279 billion in assets, targeting the "mega-transfer of wealth" of $84-124 trillion from baby boomers to younger generations over the next 20 years. Robinhood is betting that by building user habits early, it doesn't need to predict wealth succession patterns; it can simply be positioned for the wealth as it arrives. Who is winning? The two companies have similar market capitalizations: Robinhood at $81 billion and Coinbase at $85 billion. Year-to-date, Robinhood is up 135%, while Coinbase's gains are only 30%, with much of this gain coming in the past month. Bank of America analyst Craig Siegenthaler recently raised his price target for Robinhood to $119 and lowered his for Coinbase from $383 to $369, citing "Robinhood's surge in crypto revenue and Coinbase's overreliance on volatile altcoin trading, which retail users are abandoning." Coinbase's global market share fell from 5.65% to 4.56%, recovering slightly in July, while Kraken has seen the most significant growth in the US this year. Coinbase faces a dilemma: lower fees and hurt profit margins, or maintain high fees and risk losing traders. They chose profit margins by adding fees to previously free stablecoin trades, while Robinhood's fees are approximately 50% lower. Mizuho reiterated its $120 price target after meeting with Robinhood CEO Vlad Tenev, praising the company's crypto resilience and aggressive push into tokenized stocks. They stated, "The European tokenized equity opportunity, expansion into upstream and teen markets, 15% of net deposits coming from competitors, focus on NPS and execution, and crypto price inelasticity are impressive." But Coinbase possesses institutional credibility. While other exchanges compete for trading fees, Coinbase has established relationships with institutions that will shape the integration of crypto and traditional finance over the next decade. Neither company will disappear. They serve different user needs, and both are experiencing growing demand. This isn't a winner-takes-all competition, but rather 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," abstracted, simplified, and integrated into lifestyle apps, where finance becomes part of the environment. Coinbase is betting on earning trust through architecture. There's no right or wrong between the two; they simply have different goals. One pursues simplicity and trust, while the other builds the underlying architecture.
