Stock trading mobile app provider Robinhood is jumping on the crypto-trading bandwagon.
Announced today, the company, which was founded in 2013 as a way to democratize stock trading, said it plans to roll out bitcoin and ether trading services via its mobile apps next month. Not only does the company hope to attract cryptocurrency enthusiasts to its more traditional products, but it’s also launching the service to catch some of the momentum cryptocurrency has seen as of late.
“We’ve come to understand that cryptocurrencies as an asset have exhibited clear and underlying resiliency and have integrated themselves as part of a diversified and balanced portfolio,” Robinhood co-founder and CEO Vlad Tenev told CoinDesk.
To start with, the service will only be offered to users in California, Massachusetts, Missouri, Montana and New Hampshire, but more states are set to follow.
The company, which is regulated in the U.S. by the SEC and the Financial Industry Regulatory Authority (Finra), plans to offer the crypto trading service for free. Plus, it promises instant transfers on cryptocurrency purchases for amounts of $1,000 or less, a significant improvement on the time it generally takes for people to buy cryptocurrency for the first time.
“We view entering crypto as a way to extend our user base and build our brand.”
Crypto meets stock
While offering the service for free could seem risky, Tenev said, the company hopes to attract investors from the $550 billion cryptocurrency industry to the platform and its products, which already provide revenue streams.
Specifically, the firm charges for a premium service called Robinhood Gold that enables margin trading and after-hours trading. The company also generates revenue by collecting interest on cash and securities in user accounts similar to a traditional bank.
Having raised a total of $176 million in venture capital, the crypto functionality is in line with Robinhood’s push to add more products to its offering. Last month, the firm rolled out options trading and a month earlier, it added a web-based platform to its mobile services.
But the move isn’t just about luring cryptocurrency enthusiasts to its traditional products, it’s also about giving users normally focused on traditional investment vehicles exposure to cryptocurrency.
According to Tenev, the firm recently crossed 3 million accounts and $100 billion in total transacted volume.
Speaking to the company’s interest in bringing together traditional assets with nascent crypto assets, Tenev said:
“We envision a world where people can have your cryptos alongside your stocks, ETFs, and more.”
Robinhood has not built its own cryptocurrency wallet, but will be using a third-party provider. While Robinhood will manage custody of the cryptocurrencies on the user’s behalf, Tenev said the company does not intend to make investments with the cryptocurrency its customers store.
Coins to come
While Robinhood customers will only have access to bitcoin and ethereum trading, effective immediately, the company will let customers add 16 different cryptocurrencies (bitcoin and ethereum included) to their “watchlist,” a feature allowing them to monitor market data, read related news and create price alerts.
Other coins that can be added to the watchlist are bitcoin cash, litecoin, XRP (Ripple), ethereum classic, zcash, monero, dash, stellar, qtum, bitcoin gold, omisego, NEO, lisk, and dogecoin.
For now, Tenev isn’t revealing any possible plans to start trading those other currencies, however, he said that a “listing committee” had been established to analyze factors such as security, functionality and demand to assess cryptocurrencies that could be added to the trading functionality or the market data list.
And, while the company is interested in adding new cryptocurrencies to its trading platform, Tenev said Robinhood would not be adding more complicated asset classes tied to crypto, such as bitcoin or ethereum futures.
“We’re focused right now on the coins themselves, and I think in the near future we anticipate adding a variety of other coins before we extend to new asset classes.”
Disclosure: CoinDesk is a subsidiary of Digital Currency Group, which has an ownership stake in Ripple and Zcash Company, the for-profit entity that develops the zcash protocol..
App graphic via Robinhood
World leaders have struck a cautionary tone on cryptocurrencies in statements made during the World Economic Forum (WEF) event in Davos, Switzerland.
From the Prime Minister of the U.K. to the Treasury Secretary of the U.S., the event has seen a number of notable figures make remarks on both cryptocurrencies like bitcoin as well as blockchain technology as a whole. As reported yesterday, notable finance figures including Goldman Sachs CEO Lloyd Blankfein have already weighed in on the topic, suggesting that cryptocurrencies are quietly emerging as a major area of discussion at the gathering of the global elite.
For example, Steven Mnuchin, who leads the U.S. Treasury Department, remarked on one panel that “illicit use” of cryptocurrencies is a major concern for American regulators.
“My number-one focus on cryptocurrencies, whether that be digital currencies or bitcoin or other things, is that we want to make sure that they’re not used for illicit activities,” Mnuchin remarked, according to a report from Reuters.
Similarly, fellow panelist and International Monetary Fund head Christine Lagarde said bitcoin’s anonymity enables the movement of hidden funds.
“The anonymity and lack of transparency and the way in which it conceals and protects money laundering and financing of terrorism, is just unacceptable. It needs to be taken into account but then there will be innovations coming out of these movements,” Lagarde, a former finance minister of France, was quoted as saying.
Lagarde predicted that national governments are likely to further regulate cryptocurrencies to prevent these use cases. Perhaps proving Largarde’s point, U.K. Prime Minister Theresa May told Bloomberg that cryptocurrencies should be looked at due to how they are used “particularly by criminals.”
Perhaps most significantly, French President Emmanuel Macron called for an international approach to regulating cryptocurrencies, saying “we need to establish a global contract for global investment.”
Weighing the impact
Others at Davos commented specifically on the exact economic impact of cryptocurrencies today, with comments drawn from finance watchdogs from Asia and Europe, among other areas.
China’s securities regulator vice-chairman, Fang Xinghai, said during a panel that it is unclear what impact bitcoin would have on the economy.
Bank of Canada Governor Stephen Poloz echoed those remarks, adding that he believes there would be little impact on the economy if the cryptocurrency market were to crash.
He went on to caution against investing in cryptocurrencies, saying:
“When we had the tech wreck, that was a much more widespread exposure. And the fact it barely had [a] perceptible effect on the real economy because it was not a stock market crash but just a segment of the stock market. But it was highly speculative, there was all kinds of bubbles there.”
The British Chancellor of the Exchequer, Philip Hammond, argued in turn that bitcoin has the potential to grow to a point where it would have a more significant impact.
He called for further regulations “before the amount of outstanding bitcoin becomes large enough to be systemically important to in the global economy,” predicting that it would reach that point “soon.”
Bullish on blockchain
Despite their concerns about cryptocurrencies, world leaders and regulators at Davos remarked positively about blockchain as a technology.
Poloz, for example, called it “a true piece of genius,” adding that he expects it to be applied to different aspects of the economy.
“The reason that it has such appeal in the case of bitcoin is it gives you finality of settlement that eventually grinds through the distributed ledger and therefore you trust that,” he remarked, according to CNBC, on the topic of a central bank-issued digital currency. “Whereas the central bank, if the Bank of Canada, were to issue a digital currency, well you already trust the Canadian dollar, and so you don’t need a distributed ledger in order to believe you just received final payment in your digital wallet.”
Lagarde called the technology “fascinating,” noting its censorship-resistant characteristics, among others.
She also suggested that other innovations are likely to emerge from the blockchain space, cautioning that regulators will need to monitor such developments over time, saying during the panel:
“…there will be new things and innovations coming out of this movement, and we just need to keep them under our watch.”
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“We look at ethereum like AOL or Myspace.”
That’s how Mobius Network co-founder and CEO David Gobaud explains why his startup ran its initial coin offering (ICO) on the Stellar network instead of ethereum, the most popular blockchain for token sales.
The comment underscores the growing interest in some corners of the crypto community for faster and cheaper payment rails as ethereum, like bitcoin, struggles to scale.
Mobius announced Thursday that it has raised $39 million in the ICO — one of the larger recent token sales and the largest by far on the Stellar platform. The company accepted only Stellar’s native currency, lumens (XLM), in exchange for its own token, known as mobi.
According to Mobius, the sale hit its $39 million hard cap after only two hours, selling 35 percent of the total 888 million mobi tokens.
Participants in the round included China’s Angel Chain Capital, Nirvana Capital and WaltonChain, an internet of things (IoT) startup that is building devices to enable manufacturers and retailers to track supply chains, according to the firm’s website.
In addition to this backing, Gobaud emphasized that Mobius deployed its decentralized app (dapp) store alongside its ICO, saying it was important for the company to come out with live code early, to prove the project was real.
But what’s perhaps most striking about the sale was the choice of blockchain.
While latency or cost might not be a dealbreaker for some blockchain projects, they are for Mobius’ use case. Its thesis is that traditional tech companies will soon want to integrate with cryptocurrencies and, eventually, a decentralized web.
Mobius’ white paper compares the company’s work to that of Stripe, the Silicon Valley darling that took integration of credit card payments down to a few lines of code (and incubated Stellar in its early days). Mobius aims to do the same thing for cryptocurrency payments and, down the line, for publishing data to trade on decentralized marketplaces.
So the company needed an IoT-friendly network that could handle large amounts of transactions and data quickly, with low or no fees.
The goal is to “make it easy to connect every device, developer and data stream to the blockchain ecosystem,” Gobaud said.
Yet while the vast majority of ICO-funded projects have been run on top of ethereum, using the ERC-20 standard, that blockchain has suffered from transaction backlogs and pendulum-like swings in fees.
Hence, after beginning its project on ethereum, Mobius switched to Stellar, the protocol created by Ripple co-founder Jed McCaleb. Like Ripple before it, Stellar was designed specifically for frictionless payments.
Ethereum’s scaling challenges have become acute in recent months. The issue moved Kik to announce that it would move its kin token off ethereum in December 2017.
While the ethereum developers recognize and are working on the problem, the Mobius team couldn’t wait for a scaling solution, Gobaud said.
“We were building our dapp store on ethereum and then we connected with Jed,” he said adding:
“We realized there was no way that ethereum could handle our technology. It was too slow, too expensive and too insecure. … We see all these other projects with these immense problems”
Gobaud highlighted the problems with safely deploying smart contracts. “They are Turing complete programs, but they are really hard to write,” he said, pointing to the first and second multi-million-dollar ether losses on Parity. Solidity was not a language built with security in mind, Gobaud argued.
In Stellar, “we think we’ve uncovered this underutilized, really unknown technology,” Gobaud said.
For example, Stellar supports multi-signature wallets at the protocol level, making custodianship much easier for developers.
But Stellar has its downsides, Gobaud acknowledged. It’s not Turing complete, for example, but Mobius is happy to make that trade-off in exchange for vastly faster and cheaper transactions.
The white paper discusses a lot of use cases for the mobi token and its protocol, but the easiest one to explain is payments.
For anyone who believes that cryptocurrency will become more and more appealing to online businesses, the company that makes transacting in crypto easy the fastest stands to recoup benefits with a long tail.
If Mobius can make accepting crypto payments a matter of adding a few lines of code, that would be compelling if online companies begin accepting cryptocurrency more widely.
Talking to Gobaud, though, payments seems more like a way to sell the traditional internet on blockchain integration.
He’s most excited about the market that will come when firms start posting their data to decentralized marketplaces, selling it via secure, live auctions he calls the “NASDAQ for data.”
“More advanced or technical users are really excited about the data marketplace because they are aware that getting data into blockchain ecosystem is really complicated.”
Data generated on blockchain protocols is easy to verify because they are closed environments. But data from the real world can’t be verified on a blockchain without help.
That’s why Mobius is building a proof-of-stake oracle system, so that data streams with data from the real world can build up reputations as reliable sources over time. With the system, to put its data up for sale on the market, a company would have to prove it holds a certain amount of tokens.
If that marketplace catches on, the cost of staking should be more than paid for by revenue from selling data over time. This could be anything from data about road conditions from a smart vehicle or local weather from a sensor on top of a commercial building.
To reach the point where the decentralized web has a rich enough ecosystem to support these marketplaces, the team is also working to solve other small problems faced by developers on the way there. For example, it built a universal login protocol, where a website can verify that a device holds a token to let its user log on to a service.
Some sites might want to take this a step further and use tokens to integrate the level of access someone has to a site. So, on a platform like Reddit, a user might only need one token, while a moderator might need a few tokens to log in with more advanced permissions.
In the meantime, developers are already building dapps for Mobius’ store, but it’s small scale offerings so far, little video games or prediction games. That’s work at the experimental level, but Gobaud said he’s encouraged by the fact that people already want to work with it. The websites on Geocities were crude, too, but they were a stepping stone to the web we know today.
“It’s like the early days of the internet.”
Disclosure: CoinDesk is a subsidiary of Digital Currency Group, which has an ownership stake in Ripple.