Robinhood's Blockchain Success Spells Trouble for Ethereum
Robinhood's new blockchain, launched on July 1, has been a success. The Robinhood Chain, built on Arbitrum's technology, already has $257.4 million in total value locked (TVL), surpassing many networks that have been operating for years. In the seven-day period ending on July 20, it cleared $4.5 billion of decentralized exchange (DEX) trading volume.
Despite Ethereum's price rising due to a narrative that more activity on the platform is good for the coin, Robinhood's entry into the crypto space is bearish for Ethereum. The reason lies in how Layer-2 networks process transactions off of Ethereum's main chain, reducing congestion and sending bundles back to the main chain.
The money from the Robinhood Chain's gas fees doesn't flow to Ethereum. According to an estimate by Ark Invest analyst Lorenzo Valente, only 0.15% of the $816,000 in cumulative chain fees reported on the Robinhood Chain through July 13 ended up flowing to Ethereum, amounting to about $1,538.
The recent Fusaka upgrade to Ethereum added a fee floor, making activity on Layer-2 chains pay Ether holders more. However, the fee floor at the Robinhood Chain's economics is extremely low, requiring 'a wholesale change in developer mindset and in ETH's token economics' as per Bitwise's Max Shannon.