Is the success of Robinhood Chain a boon or a bane for ETH?

Author: Christina Comben; Source: Cointelegraph; Compiled by: Shaw, Jinse Finance

Robinhood Chain launched this month with great fanfare, reigniting a long-standing debate within the Ethereum community: Will a successful Layer 2 scaling network drive up demand for the native asset ETH, or will it retain all its value for itself?

This retail brokerage's Layer 2 network, built on Arbitrum, has quickly become one of the most active aggregation scaling chains in the Ethereum ecosystem since its launch on July 1st.

In the first two weeks after its launch, over $141 million worth of Ethereum assets were transferred across chains to this public chain.

DeFiLlama data shows that over 500,000 wallets currently hold ETH on this chain; the Meme coin craze has propelled Robinhood Chain's 24-hour decentralized exchange trading volume to surpass both the Ethereum mainnet and Coinbase's L2 network, Base. Fueled by a series of positive comments, the price of Ethereum surged. CoinGecko data shows that Ethereum was priced at $1582 on July 1st, rising to a high of $1825 by July 13th, a cumulative increase of approximately 15%. Eric Trump of World Liberty Financial posted on July 11th: "Ethereum's surge is truly exhilarating!" Tom Lee, Chairman of BitMine, stated that the implementation of Robinhood Chain confirms the core logic of "ETH as currency," arguing that ETH serves as the native fee for all L2 networks, and all L2 transactions ultimately require final confirmation on the Ethereum mainnet. Ethereum investors had heard similar arguments before. Arbitrum, Optimism, and Base previously brought a large number of users and on-chain activity to the Ethereum L2 ecosystem, but they did not substantially boost the price of ETH; the value generated by the vast majority of economic activity remained within their respective aggregation chains. The launch of Robinhood Chain, however, is entirely different. While previous scaling chains were built by native crypto companies, this L2 network comes from a listed retail brokerage firm with tens of millions of existing users, focusing on tokenized stocks and other real-world assets. Token Terminal data shows that within just a few days of its launch, the chain's tokenized stock holders already accounted for 6.9% of the total market. The reaction of Ethereum's price after Robinhood Chain's launch. Data source: Coingecko. If Robinhood's model succeeds, it will incentivize banks, securities firms, and asset management institutions to build their own dedicated L2 networks, solidifying Ethereum's position as the default underlying public chain for traditional finance. Deutsche Bank is currently developing an Ethereum Layer 2 DAMA 2 based on zero-knowledge proofs (ZK), primarily targeting institutional financial services. Why Robinhood May Become a Turning Point for the Industry Ethereum's L2 network relies on Rollup technology to process transactions off-chain and periodically settle them back onto the Ethereum mainnet. Robinhood Chain is built using Arbitrum technology and is compatible with the entire Ethereum ecosystem. However, what truly attracts the industry's attention is not the technology itself, but the entity operating this chain. "This is a real milestone," said Alex Gluchowski, founder and CEO of Matter Labs, the developer of Ethereum Layer 2 zkSync, in an interview. "It marks the transformation of Ethereum L2 from an experiment for crypto-native teams to the infrastructure upon which licensed, publicly traded companies rely to conduct business." He added that Stripe chose to build its own public chain, Tempo, from scratch, while Robinhood took a different approach, customizing its Ethereum aggregation chain to "meet privacy, compliance, and performance requirements while inheriting Ethereum's security foundation and integrating Ethereum's ecosystem liquidity." Max Shannon, senior research analyst at Bitwise, stated that the significance of Robinhood Chain's implementation far surpasses that of any previous L2 project. "This represents a large-scale expansion of the Ethereum ecosystem at the institutional level," he said. "Currently, Ethereum is also repositioning itself towards the institutional market through Eth Labs and the Ethereum Institutional platform, and the timing is perfect." Will Robinhood Chain change Ethereum's investment logic? According to Shannon, the launch of Robinhood Chain further solidifies Ethereum's investment value and reinforces its leading position as the preferred public chain for institutions. He believes that Ethereum possesses the network attributes to become a massive institutional L2 reserve asset. However, consistent with the views of most industry professionals, he suggests that Ethereum's token economic model still needs optimization to more directly translate on-chain activity growth into ETH demand. A long-standing criticism in the industry is that Ethereum deliberately suppresses the transaction fees submitted to the mainnet by L2 servers in order to promote the adoption of L2 and build network effects. This design has been widely criticized. Lorenzo Valente of Ark Invest wrote that Robinhood Chain has generated $816,000 in transaction fees since its launch, of which Arbitrum took 10%, with only 0.15% flowing back to the Ethereum mainnet. "If you adhere to the core logic of 'ETH is currency,' Robinhood's entry will be a major positive: increased on-chain activity, rising ETH staking volume, and continued strengthening of its long-term value attributes. However, if your logic is 'ETH is an asset that generates revenue through transaction fees,' then this is an extreme negative." Data analytics platform GrowThePie claims that Valente's Ethereum revenue sharing ratio is four times off, and the actual share should be 0.6%. Even using this higher figure, the increase in revenue for the mainnet is still negligible. In the past week, Robinhood Chain generated far more transaction fees than any other L2 network, but the Ethereum mainnet only received $4,400. Gluchowski stated that Ethereum's appreciation logic does not rely on transaction fee revenue, but rather on its widespread acceptance as a universal currency across various L2 ecosystems. "Users might pay transaction fees with stablecoins, or even not care about fees at all," he said, "but as more and more asset values ​​are settled on Ethereum, ETH will no longer be just a fee token, but the base currency asset of the entire system." Even Mike Dudas of 6th Man Ventures, an Ethereum short seller, described Robinhood Chain as "the strongest positive event in the Ethereum space in years." However, after seeing the data released by Valente, Dudas added a prerequisite: "Unless the 'ETH as currency' narrative is fully realized, or mainnet settlement fees are increased, it will be difficult to realize the value of Ethereum." The value capture problem remains unresolved. While the success of Robinhood Chain certainly proves the feasibility of Ethereum's scaling path, it still fails to answer the network's most fundamental unresolved problem: how will the continuously increasing transaction volume of the second-layer chain ultimately be converted into the value of ETH itself? Shannon stated that although recent upgrades such as Fusaka have improved Ethereum's scaling capabilities, even with record-high on-chain transaction activity, market demand has not translated into significantly increased transaction fees or more ETH burning. "Robinhood Chain can't solve this problem, and it's highly unlikely that a large number of L2 servers can scale together... This requires a complete overhaul of the developer mindset and the entire ETH token economy mechanism." Another uncertainty lies in the actual scale of ETH held directly by institutional users. As tokenized stocks and other real-world assets (RWAs) increasingly use stablecoins as trading currencies, many users may hardly ever touch ETH—even though the entire network's underlying security is provided by ETH. While Robinhood has demonstrated that large financial institutions are willing to build their businesses on Ethereum infrastructure, whether this will ultimately translate into strong demand for ETH remains to be seen.