The features offered by blockchain are redrawing the boundaries of traditional finance. The Robinhood platform has understood this well with the principle of tokenization, to the point of shaking up the historic stock market players on Wall Street.
Robinhood’s tokenized shares are a game changer
Traditional finance has not always been very welcoming to developments in the cryptocurrency market. This mistrust is understandable, given the current advances that are disrupting its established balance.
Among these is the principle of tokenization, which can be applied using blockchain technology. This process digitizes real-world assets (RWA) to make them more liquid and tradable 24/7. However, not everyone is happy about its use.
The American platform Robinhood has just decided to innovate in this area by offering tokenized shares on its exchange. This offer was quickly contested by the artificial intelligence (AI) leader OpenAI, which claimed that it replicated its unlisted shares.
This was an opportunity for Galaxy Digital analysts to take stock of this still-nascent market, and more specifically of the “token engine” system implemented by Robinhood on a dedicated layer 2 within the Arbitrum Orbit ecosystem.
Users can transfer these tokens to anyone with an on-chain wallet, interact with other online applications, and store them in their own wallets—all things they cannot do with traditional stocks.
Galaxy Digital
Wall Street is not ready
On the traditional stock market side, the situation is quite different. Indeed, as Galaxy Digital analysts point out, “Robinhood’s tokenization effort effectively extracts assets from the traditional market trading stream and puts them directly on the blockchain rails to enable 24-hour trading.” A shift that could cost them dearly.
If existing exchanges fail to adapt, they risk being left behind as mere custodians of a less functional version of the same assets.
Galaxy Digital
The only real competitive advantage of traditional exchanges such as the NYSE lies in their “deep concentration of liquidity and activity” combined with the collection of trading fees and the sale of market data. Suffice it to say that this business model will not stand up for long in the face of the unrestricted trading offered by real world assets (RWA).
Traditional finance is not only integrating cryptocurrencies into its products, such as spot ETFs. It will have to reinvent its business model in order to withstand the arrival of tokenized stocks that can do without its services.
