Understanding the story behind Robinhood’s partnership with Arbitrum

Author: Haotian

A brief interpretation of the news that Robinhood App plans to build layer2 on Arbitrum:

1) From a technical perspective, Robinhood's choice to stand with Arbitrum's Nitro is no different from Coinbase's choice to stand with Optimism's OP Stack technology stack. But Base's performance has proved a rule: the success of a technology stack does not equal the success of the parent chain.

The rise of Base is more the result of Coinbase's brand effect + compliance resources + user diversion, which to some extent also provides some guidance for Robinhood's residence in Arbitrum.

This means that in the short term, it cannot be proved that the price of $ARB is undervalued (compare with the performance of $OP), but in the long run, once the "U.S. stock chain" scenario targeted by Robinhood is successful, it may change the embarrassing situation of layer2 as an Ethereum layer1 expansion solution with "technology but no implementation", and will open up an unprecedented Mass Adoption path for both L1+L2 of the Ethereum ecosystem.

2) Coinbase's layer2 is more of a general layer2 solution, mainly following the past transaction-oriented scenarios such as DeFi, GameFi, and MEME, but Robinhood may be different this time. It will go the direction of professional layer2 and customize a set of on-chain infrastructure specifically for traditional finance chaining?

Although the transaction confirmation time of OP-Rollup can also be sub-second, the security of this type of transaction itself is still within the scope of the optimistic Rollup with 7-day fraud verification. Robinhood's new layer2 needs to deal with features such as T+0 stock settlement, real-time risk control, and compliance requirements. It may be necessary to make deep customizations at the virtual machine level, consensus mechanism, and data structure of layer2 to fully squeeze the potential of the Layer2 expansion solution.

3) Arbitrum's technical solution is more mature than Optmism: Nitro's WASM architecture has higher execution efficiency and has a natural advantage in processing complex financial calculations; Stylus supports multi-language development of high-performance contracts and can carry some heavy computing tasks in traditional finance; BoLD solves malicious delay attacks and consolidates the security of optimistic verification; Orbit supports customized Layer3 deployment and provides sufficient flexibility to develop features.

You see, if Arbitrum can be selected, there must be a reason for it. Its technical advantages seem to meet the demanding "customization" requirements of traditional finance for infrastructure, unlike OP Stack, which only needs to run through. This is also very Make Sense. After all, in the face of the ultimate challenge of carrying trillion-level TradFi business, the maturity and professionalism of technology will determine success or failure.

4) US stocks on the chain and coin-stock exchanges are no longer the "coin issuance narrative and game" commonly used in the traditional currency circle. They are not only facing "speculative users" who do not care whether the project products are delivered or whether the experience is smooth in order to speculate on coins. Once the network fluctuates and causes congestion, there are transaction delays, etc., which is absolutely intolerable for users who are familiar with traditional financial product lines.

These traditional financial users are familiar with the silky experience of millisecond-level response, 7×24 hours of uninterrupted service, and T+0 seamless settlement. More importantly, they are often backed by institutional funds, algorithmic trading, and high-frequency strategies, which have abnormal requirements for system stability and performance. This means that the user groups that Robinhood layer2 will serve will be completely different, and the challenges are very arduous.

The above.

In short, Robinhood's layout of layer2 will be of great significance. It is no longer as simple as adding a new player to the layer2 technology stack, but a hard-core experiment to verify whether the Crypto infrastructure can undertake the core business of the modern financial system.

Once the experiment is successful, the digital reconstruction of the entire trillion-level TradFi market, such as bonds, futures, insurance, and real estate, will be accelerated. Of course, in the long run, it will have a direct benefit to the application scenarios of the entire Ethereum L1+L2 ecological technology facilities, and will also redefine the value capture logic of Layer2.