In this article, we dive deep into the Robinhood trading app, the built-in Robinhood crypto wallet, and the Robinhood web wallet launching later this year. Also, we discuss the pros and cons of the existing crypto wallet. Plus, the significance of the Robinhood crypto wallet release date, alongside what to expect with the upcoming Web3 wallet launch. Finally, we explore the Robinhood business model and the benefits and drawbacks of the brokerage and trading platform.
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What is Robinhood?
Robinhood Markets, Inc. (HOOD), headquartered in California, hosts a retail investor trading application and brokerage that launched in April 2013. In March 2015, Robinhood launched its mobile application alongside a new product range, including several leading cryptocurrencies. Since then, the trading app has gone from strength to strength accruing over 13 million users. Plus, user analytics show the average Robinhood investor age is 31. Thus, Robinhood is positioning itself in a valuable space garnering the interest and engagement of younger generations. With low fees and an intuitive user experience (UX), Robinhood is one of the leading retail investor applications.
Robinhood offers a select range of services catering to everyday retail investors, making it easy to gain exposure to popular stocks and shares. Also, there is a range of different options for investing. Robinhood’s successful user growth catalyzes further application developments, including a built-in Robinhood crypto wallet and a separate Robinhood Web3 wallet. The millennial favored trading app is listening and catering to its users’ demands for a more comprehensive choice of custodial options for their assets. As a result, the highly anticipated Web3 wallet promises a suite of decentralized finance (DeFi) integrations and activities for Robinhood users to enjoy.
Robinhood Products and Services
Generally speaking, the millennial ("Gen Y") and younger generations have lower net wealth and disposable income than "Gen X" and baby boomer generations. To cater to users with a lower investment budget, Robinhood offers smaller quantities of assets through fractional shares. For a project to qualify, the trading parameters for fractional share orders include a minimum project market capitalization of $25 million alongside a share price worth more than $1.00.
For fresh investors with minimal trading experience, Robinhood provides a range of different services for users to try. However, for the more experienced trader seeking extra flexibility with trades, Robinhood is perhaps not an ideal app. In addition, the breadth of financial trading tools may seem restrictive to full-time successful traditional investors. For example, Robinhood doesn't include commodities, foreign exchange (forex), or futures trading. Moreover, the brokerage currently doesn't support fixed-income products, mutual funds, or short selling.
With that said, Robinhood is an easy, convenient, and cost-efficient way to invest in leading cryptocurrency projects. This includes Bitcoin (BTC) and Ethereum (ETH), just to name a few. Plus, investors can place a long trade on popular stocks if they believe the price action to be bullish. Robinhood provides users with a variety of single and multi-leg options. Also, the brokerage allows investors to choose from different order types (market orders and limit orders). Users can pay $5 per month to gain the Robinhood "gold status" with exclusive perks. Robinhood gold members can view market data and trade on margin (borrowing money from the platform to trade with). Plus, members gain access to in-depth research reports in partnership with Morningstar providing up-to-date trading statistics.
Robinhood Crypto Wallet
During the Bitcoin 2022 conference in Miami in April, Robinhood's Chief Product Officer (CPO), Aparna Chennapragada, made an exciting announcement for its users. Until this date, only a small group of beta testers of their wallet could transfer crypto assets within the Robinhood app. With a launch coinciding with the world's biggest Bitcoin conference, the Robinhood in-app crypto wallet went live for over two million eligible people on its waiting list. However, the Robinhood crypto wallet is not accessible to its users in New York, Hawaii, and Nevada due to regulatory discretion.
Operating on Bitcoin's layer-2 Lightning Network, the Robinhood crypto wallet supports high-speed, low-cost transactions. The in-app crypto wallet is a fully custodial service, with Robinhood as the custodian of users' private keys. Furthermore, the crypto wallet only supports crypto assets existing on Robinhood's trading list. Accordingly, the Robinhood wallet is not compatible with the Ethereum ERC-20 token standard. Moreover, it isn't compatible with the Ethereum NFT standards (ERC-721, ERC-1155). The Robinhood FAQ section clearly advises, "any NFTs sent to a Robinhood Ethereum address may be lost and unrecoverable". This also means that the Robinhood crypto wallet is not compatible with airdrop events or fork updates.
On the other hand, users can move their assets from Robinhood into crypto wallets compatible with decentralized finance (DeFi) functionalities, with zero withdrawal fees. However, users will still need to cover gas costs. The Robinhood wallet has a daily withdrawal limit of $5,000 alongside KYC (know your customer) identity checks required. Also, the app will prompt users to enable two-factor authentication (2FA) to gain access to the wallet.
Robinhood Web3 Wallet
An extension of the Robinhood crypto wallet is the Robinhood Web3 wallet. The Robinhood Web3 wallet will provide a full non-custodial service, unlike its custodial counterpart. This means users have access to their funds at all times. Moreover, the Robinhood Web3 wallet features a range of integrated DeFi tools and instruments previously unavailable. With beta testing set to begin during the summer, the Robinhood Web3 wallet launch is expected towards the end of 2022.
Unlike the Robinhood crypto wallet, the Web3 wallet will be fully compatible with top non-fungible token (NFT) standards. Plus, the Robinhood Web3 wallet will act as a gateway to NFT marketplaces and other DeFi applications. As such, Robinhood users will be able to earn a yield on their investments alongside various other borrowing and lending facilities. Another perk of the Robinhood Web3 wallet is network fee-free trading with cryptocurrencies. Furthermore, as a multi-chain compatible wallet, users can interact with numerous DeFi platforms across different blockchain networks.
With the Robinhood crypto wallet targeting new investors, the Robinhood Web3 wallet caters to users seeking "advanced use cases of crypto", according to Robinhood's crypto Chief Technology Officer (CTO) Johann Kerbrat. The Robinhood mobile app offers a new pathway for the mass adoption of crypto, placing a user-friendly DeFi gateway in front of millions of new crypto investors. To learn more about the advantages of blockchain and Web3, save our "Why to Learn Web3 Development" article for later! Or, see our Blockchain & Bitcoin Fundamentals course to learn about how the technology works and the history behind it.
Robinhood Crypto Wallet Release Date
In September 2021, Robinhood's former Chief Operating Officer (COO), Christine Brown, tweeted advising users of a "WenWallets" waitlist. This would allow users to sign up to be the first to test the Robinhood crypto wallet. The exact Robinhood crypto wallet release date was yet to be confirmed. However, in December, the platform announced it would begin beta testing the crypto wallet with the first 1,000 signups. On April 7, 2022, the Robinhood crypto wallet release date was confirmed on the day of the Bitcoin 2022 conference. With the launch, the waitlist of over two million people gained access to the sending and receiving of cryptocurrencies within the Robinhood trading app.
Five weeks later, on May 17, Robinhood made another crypto wallet-based announcement. On the company blog and website, Robinhood announced the development of a non-custodial Web3 wallet to complete its product suite of crypto wallets. What's more, users can sign up for the waitlist now. Users of the waitlist gain the chance of being picked for the beta testing phase. This is due to begin in the summer of 2022. Following testing, analysis, and potential further developments, Robinhood plans to launch its Web3 wallet towards the end of 2022.
How Does Robinhood Make Money?
Robinhood operates an unusual and attractive business model for users, with commission-free investing and trading and fee-free equity and options trades. Offering a low-cost service to its users, Robinhood primarily makes its profits with transaction-based revenues. Accordingly, the website offers users a breakdown guide on how the platform generates its revenues.
The company outlines four main income revenues: interest paid on cash, payment for order flow (PFOF), stock loan programs, and margin interest. First, Robinhood deposits any cash that isn't invested in the cash management network into interest-bearing accounts. Second, payment for order flow (PFOF) is a model that accepts payments from market makers for putting customers in front of said trading venues. PFOF is a common revenue model for brokerages. However, Robinhood is pretty private regarding the numbers and parties involved. Stock loan programs involve the platform lending out stock as margin securities to counterparties for a fee. Finally, Robinhood offers an optional "pay-for premium" service, Robinhood Gold, charging users to gain access to margin trades, among other features.
Why Use a Robinhood Crypto Wallet?
Robinhood is a retail investor-centric brokerage and trading platform offering an onboarding service for novice to experienced traders. Active for nearly a decade, Robinhood has shown considerable adoption and expansion of its services. However, the platform has historically received a bad reputation for enabling risky trading strategies to inexperienced investors. Following regulatory investigations in 2021, Robinhood paid out over $70 million in compensation to its users for misleading customers. Also, users were reimbursed for repeated downtime on the app resulting in a loss on trades.
That said, 2021 was one of Robinhood's most successful years, with the net funded accounts increasing by 81%. Accordingly, Robinhood announced it had doubled its workforce throughout the year to 3,800 employees. However, the company has since stated in April 2022 that it will be reducing its full-time workforce by 9%. Nevertheless, Robinhood is an active and forward-thinking business targeting retail investors with easy-to-navigate crypto onboarding tools. The brokerage and trading platform is ideal for new investors, with the built-in Robinhood crypto wallet being a great mid-way step towards a non-custodial service.
To cater to more experienced crypto traders seeking further utility and flexibility with trades and asset storage, the Robinhood Web3 wallet is the solution. With extensive planning, testing, and development, the Robinhood Web3 wallet is set to become an engaging and interactive DeFi gateway. Overall, the Robinhood trading platform is a great choice for crypto novices to experiment with crypto investing using a reputable centralized platform before branching out towards the world of decentralized finance. As with any investment platform, make sure to do your own research first. Never invest more than you can afford to lose. Plus, ideally, don't keep all your assets in one account, wallet, or exchange.
Exploring Robinhood Web3 Wallet - Summary
Robinhood is a long-standing retail investor brokerage and trading platform with desktop and mobile applications. At the beginning of April, during the largest Bitcoin conference in the world, Robinhood announced the launch of its built-in crypto wallet. The Robinhood crypto wallet release date was a significant PR move, launching the custodial feature in front of thousands of industry experts and pioneers. During which, more than two million people on the "WenWallets" waitlist could freely transfer crypto assets on the trading platform between other wallets.
However, the built-in Robinhood crypto wallet lacks compatibility with Ethereum token standards and requires KYC identity documents to sign up. As an extension of the available wallet range, the soon-to-launch Robinhood Web3 wallet will cater to the needs not met by the existing crypto wallet. This includes multi-chain, multi-asset storage with a gateway to DeFi applications, including NFT marketplaces, yield farms, and lending platforms. As a non-custodial service, users will have access to their funds at all times. Following upcoming beta testing in the summer, the Robinhood Web3 wallet is set to launch towards the end of 2022.
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