The Arbitrum and Robinhood partnership illustrates the changing landscape of blockchain infrastructure adoption among large financial services companies. Today, instead of solely depending on public blockchains, large consumer-facing companies are increasingly interested in application-specific Layer-2 (L2) blockchains. The current situation revolves around the question of why Robinhood, one of the largest retail brokerage services in the world, decided to develop its own L2 solution based on the Arbitrum Orbit Stack and what implications this has for the world of blockchain technology.
Arbitrum, one of the most popular Ethereum scaling solutions, and Robinhood, a retail brokerage service with millions of customers worldwide. The partnership between the two companies illustrates the different considerations that large-scale financial services companies have when it comes to blockchain infrastructure, as opposed to crypto startups.
Background: Arbitrum and Robinhood in Context
What is Arbitrum?
Arbitrum is an Ethereum Layer 2 scaling solution that aims to lower the cost of transactions and improve the speed of transactions, all while providing the same security as the Ethereum mainnet. It achieves this by using optimistic rollups to perform transactions in an off-chain setting and finally propagating them to the Ethereum mainnet.
Arbitrum also provides a public Arbitrum One and Arbitrum Nova network, in addition to a solution named Orbit, which enables organizations to create customized L2 or L3 chains according to their needs.
What is Robinhood?
Robinhood is a retail brokerage service that initially gained popularity for its commission-free trading of stocks, options, and cryptocurrencies. Today, with over 10 million customers, Robinhood faces the challenge of scaling its infrastructure to handle performance, regulatory, and usability requirements.
With the increasing adoption of crypto by retail customers, the blockchain infrastructure of Robinhood has evolved from basic asset storage and trading to more advanced infrastructure solutions.
Why Create a Custom Layer-2?
The driving factors for Robinhood’s decision
Robinhood’s decision to create a custom L2 instead of using existing public chains is driven by the following structural requirements:
Scalability with predictable costs
Control over transaction ordering and performance
Custom compliance and risk management solutions
Simplified user experience for non-technical users
A custom L2 enables Robinhood to design for its product needs instead of designing around the limitations of a public blockchain.
Understanding the Orbit Stack
The Orbit Stack is a modular solution for launching customized rollups, developed by Arbitrum. This allows companies to develop an L2 solution instead of a standalone blockchain, providing flexibility and security from the Ethereum network while maintaining greater control over parameters such as governance, fee structures, and even the use of a custom gas token, without exposing themselves fully to the volatility of a public network.
Key Features of Orbit-based Chains
Developed on the rollup technology of Arbitrum
Customizable fee structures, governance models, and support for a custom gas token
Permissioning or restriction on certain activities
Compatibility with Ethereum and other Arbitrum chains
Orbit is an attractive solution for companies that want to harness the benefits of blockchain technology without being exposed to the volatility of the public network.
How a Robinhood L2 Fits Into the Ecosystem
The idea of a robinhood chain is often mentioned as shorthand for a dedicated execution layer closely integrated with the Robinhood app. Instead of being a public network competing for general-purpose use, this chain would function as infrastructure supporting brokerage activity, such as asset transfer, settlement, potentially tokenized products, and possibly operating with a custom gas token aligned with Robinhood’s internal ecosystem design.
This is similar to how traditional financial institutions have private or permissioned networks while still using the public blockchain for security.
Step-by-Step: How a Custom L2 Typically Works
Users make transactions through a friendly app interface
Transactions are executed on the L2 instead of Ethereum mainnet
Batches of transactions are periodically submitted to Ethereum
Ethereum serves as the final settlement and dispute resolution layer
This design provides a balance of speed and decentralization without requiring users to understand complex blockchain interactions.
Benefits and Trade-Offs
Potential advantages
Lower transaction fees for end users
Faster confirmation times
Greater control over network parameters
Easier compliance integration
Potential limitations
Reduced openness compared to fully public chains
Dependence on the operator’s governance model
Less composability with unrelated DeFi protocols
Comparison Table: Public L2 vs Custom Orbit L2
Feature | Public Arbitrum L2 | Custom Orbit L2 |
Network access | Permissionless | Configurable |
Fee structure | Market-driven | Operator-defined |
Governance | Community-based | Organization-led |
Use-case focus | General-purpose | Application-specific |
Broader Implications for Crypto Infrastructure
The Arbitrum x Robinhood partnership illustrates a growing trend: verticalized blockchains designed for specific products rather than general experimentation. As more consumer platforms adopt blockchain rails, infrastructure may increasingly resemble cloud computing—shared security layers with customized execution environments.
This does not replace public blockchains but complements them, allowing different levels of openness depending on user needs.
Conclusion
The decision behind Arbitrum x Robinhood: Why the World’s Biggest Retail Broker Built its Own L2 on the Orbit Stack reflects a practical evolution in blockchain adoption. Rather than prioritizing ideological decentralization alone, large platforms are focusing on usability, reliability, and scale.
By leveraging Arbitrum’s Orbit Stack, Robinhood gains a flexible execution layer anchored to Ethereum’s security, while users benefit from smoother interactions and lower costs. This model signals a future where blockchains increasingly operate behind the scenes—powering mainstream financial products without requiring users to understand the underlying complexity.
As the ecosystem matures, such partnerships may become less of an exception and more of a standard approach to integrating blockchain technology into global financial infrastructure.
Common Questions (People Also Ask)
1. Why would a company build its own Layer-2 blockchain?
Building a dedicated L2 allows companies to optimize performance, reduce costs, and design features aligned with their regulatory and product requirements.
2. Is a custom L2 still decentralized?
It can be partially decentralized. While settlement relies on Ethereum, operational control often remains with the organization running the chain.
3. Does this compete with Ethereum?
No. Custom L2s still rely on Ethereum for security and settlement, reinforcing Ethereum’s role as a base layer.
4. Can developers build on these chains?
Depending on configuration, some Orbit chains may allow third-party development, while others remain restricted.
5. What does this mean for retail users?
For users, the change is mostly invisible. The goal is faster, cheaper transactions with minimal complexity.
