Robinhood built its own chain. It still pays rent.

For every dollar Robinhood Chain makes, ten cents is sent to a community-controlled fund, known as a DAO. This setup has been widely reported as a positive development for the value of Arbitrum’s token.

Summary

Interestingly, no one seems to be asking what happened when a brokerage firm, after ten years of eliminating middlemen, ended up as a renter itself.

It’s pretty ironic, honestly. As a crypto investor, I remember Robinhood building its whole brand around *removing* the middleman and lowering fees. They argued traditional finance had too many layers taking a cut. Now, they’ve launched their own blockchain, which, at its core, *is* a middleman – they control it, manage transactions, and collect fees. And here’s the kicker: they’re giving away 10% of those fees! 8% goes to people holding their governance token, and 2% to a developer group, all through something called the Arbitrum Expansion Program. Everyone’s been talking about how this benefits the ARB token and why it went up, but nobody seems to be asking the important questions: what exactly did Robinhood buy into, what are they actually paying out, and does the whole thing even make financial sense?

What the arrangement actually is

The mechanics are specific enough to matter, and they have been reported loosely in several places.

The Arbitrum Expansion Program includes any new Layer 2 or Layer 3 networks created using Arbitrum’s Orbit tools, as long as they don’t settle transactions directly on Arbitrum One or Nova. These networks send 10% of their total revenue back to the Arbitrum ecosystem. Most of this – 8% – goes to the Arbitrum DAO treasury, where ARB token holders can vote on how it’s used. The remaining 2% supports the Arbitrum Developer Guild, which funds tools, grants, and other development work.

There are three important points often overlooked in that explanation. First, the fees are calculated based on *net* revenue, not total (gross) revenue. This means the calculation only considers earnings after network operating costs have been paid. This is beneficial for businesses because it links payments to actual profits, rather than simply how many transactions occur. It’s much more favorable than a fee based on gross revenue, and ensures that even businesses with small profit margins won’t face high fees regardless of their sales volume.

Sequencer profits are fundamental to the operation of the chain. The revenue shared with the network comes from the party handling transactions – in the case of Robinhood Chain, that’s Robinhood itself. This revenue stream is key to the economics of any Layer 2 network, and it’s the primary reason this chain was built.

The system might include profits from MEV, which is the benefit gained from strategically ordering transactions. If the network uses Timeboost – a system that maximizes these profits, similar to what Arbitrum does – those earnings could be shared as well. Robinhood is currently considering adopting this technology, and it’s a significant decision because the ability to prioritize transactions on a platform handling traditional stocks is much more valuable than on a platform focused on less serious digital assets.

Unlike Arbitrum One, which directs all its fees to its treasury, Orbit operates with a more streamlined fee structure. This is intentional – it’s the trade-off for utilizing the technology without being directly connected to the main Arbitrum chain.

The numbers, now that they exist

For the first three weeks this was an abstraction. It is not anymore.

As a researcher tracking Robinhood Chain’s performance, I’m pleased to report we’ve exceeded $2 million in total revenue since launching in July. Importantly, about $200,000 – or 10% – of that has been directed towards the Arbitrum ecosystem through our program. This is significant because it definitively proves the system is working as intended, and isn’t just a theoretical plan outlined in governance documents.

The network saw impressive activity right from the start, processing around 4 million transactions in its first week. Uniswap handled $500 million worth of trades in just one day on the platform, and daily trading volume quickly climbed to over $800 million within two weeks – even surpassing Ethereum‘s for a short period, reaching nearly $3.9 billion weekly. The network also generated over $800,000 in revenue in its first week, which projects to around $42 million annually. Deposits into the network exceeded $600 million this week, marking a 50% increase in just seven days.

It’s important to understand that the reported figures are currently skewed due to a temporary situation. The blockchain is offering a 90-day gas subsidy ending around October, meaning users aren’t paying typical transaction fees – and therefore revenue appears lower than it ultimately will be. Our audit of the first month clearly showed how this subsidy artificially boosts activity numbers while suppressing revenue. The $42 million annualized figure is accurate as far as it goes, but represents a minimum; we expect to see both transaction volume and revenue increase significantly once the subsidy ends. Crypto.news has also covered how this subsidy impacts these statistics.

Currently, Arbitrum generates around $4 million in revenue annually. Compared to Robinhood’s approximately $1.27 billion quarterly earnings, this amount is negligible. However, for Arbitrum itself, it represents a significant portion – about one-tenth – of its total economic activity.

What Robinhood bought

This setup seems odd only if you think there were cost-free options. But that wasn’t the case, and understanding those other possibilities helps explain the reasoning behind this decision.

Financial institutions have the option to create their own blockchain infrastructure from the ground up. This would allow them to keep all revenue generated and avoid paying fees to others. However, this approach requires significant time, carries engineering challenges, and demands robust security measures. Developing a custom settlement system means being fully responsible for auditing, defending, and fixing any issues—a critical concern for institutions handling customer funds. Furthermore, it involves building everything from scratch without the benefits of existing tools, connections to other blockchains, or compatible wallets.

Instead of creating a new blockchain, you can simply build on one that already exists, like Arbitrum One or Base. This means you’ll pay standard transaction fees and won’t have any special advantages. Robinhood initially took this approach, offering tokenized stocks on Arbitrum in 2025 before considering a dedicated blockchain. However, the downside is clear: you’re essentially renting space and have no control over the platform’s future direction, costs, or who else can participate.

Choose the Orbit path to create your own blockchain. You’ll have full control over its branding and operation, backed by technical support from Offchain Labs. This leverages the established tools and security features of the Arbitrum ecosystem, but requires sharing 10% of your network revenue. Recent launches using this method demonstrate impressive speed – blocks confirmed in as little as 100 milliseconds – seamless compatibility with Ethereum’s programming language (EVM), and use of Ether for transaction fees, all while processing millions of transactions within a week of being announced.

Looking at it this way, choosing to build something quickly instead of developing it fully explains the 10% figure. For a publicly traded company needing to maintain its stock price and experiencing a significant drop – 47% – in crypto revenue compared to last year, getting things done fast was likely more important than maximizing profit. We’ve previously analyzed why timing was so critical in this situation.

The troubling reality for Robinhood is this: despite believing the real long-term value lies in owning the core technology, they don’t actually own it. Instead, they lease it under good terms from a decentralized group whose members vote on how to use the resulting revenue.

The tenant problem

That statement isn’t just for effect. It highlights a new kind of relationship in how things are governed, one that’s unlike anything seen in traditional finance, and its potential impact hasn’t been considered yet.

Eight percent of funds goes to the Arbitrum DAO treasury, which is managed by ARB token holders who vote on how it’s used. These same holders also guide the development of the technology that Robinhood’s blockchain relies on. This means a regulated brokerage firm like Robinhood now shares revenue with – and depends on – an organization where decisions are made through votes cast by potentially anonymous token owners.

This kind of setup is common for companies built directly around cryptocurrency. However, it’s new territory for traditional public companies that report to shareholders, follow regulations, and safeguard customer funds. The main concerns aren’t about the idea itself, but practical issues: What happens if the governing body changes the fees? What options are available if the project’s development doesn’t align with the company’s needs? And how does a regulated company properly explain its reliance on a decentralized autonomous organization (DAO) when reporting risks?

The situation is also competitive. The Orbit program is open to everyone, meaning any company can follow the same process under the same conditions. Robinhood’s deal isn’t exclusive, and doesn’t give them a lasting advantage over other brokerages that could build similar systems, which limits its long-term benefit. However, it *does* provide a blueprint for others. The industry has taken notice – we’ve seen Nasdaq partnering with Kraken’s parent company, and ICE working with OKX, both building blockchain-based share issuance systems, and none of them need to start from zero.

Does the arithmetic work

Forget about the details for a moment and focus on the core business issue – its solution will tell you if all this discussion is even important.

The chain currently generates about $42 million in annual revenue before the subsidy ends, compared to $4 million for Arbitrum. While the parent company’s quarterly revenue is around $1.27 billion, the chain’s contribution represents a small percentage of its overall income. The payment received from Arbitrum is insignificant to the parent company’s financial performance.

The real importance of the fee sharing isn’t about the money itself, but about what it reveals about Robinhood’s overall strategy. They didn’t create this system just to earn small fees from transaction ordering. Their primary goal is to control the process of settling trades for digital stocks, ensuring they aren’t reliant on competitors as this new market grows. They want to be the platform where their own financial products are traded. Any revenue from transaction ordering is just a bonus, and giving up 10% of that bonus is a small price to pay for the control and opportunities it provides.

The real challenge arises when the volume of tokenized stocks becomes significant. If these stocks gain popularity as predicted by the DTCC’s involvement, and Robinhood Chain becomes a major platform for trading them, the fees paid to the sequencer will increase, and that 10% fee will become substantial. A tiny error in calculation is insignificant, but 10% of a whole business is a serious matter, and the terms of the Arbitrum Expansion Program were naturally set by those who created it.

The precedent this sets

Without mentioning specific companies, this situation highlights a growing trend in the industry: infrastructure providers are earning a cut from businesses they don’t actually run.

Arbitrum functions more like a franchise system than a traditional blockchain. It provides the underlying technology, tools, security, and developer assistance, then takes a cut of the earnings generated across multiple chains it didn’t create itself. The team at Offchain Labs has openly stated this is their plan, focusing on business adoption as their primary source of revenue and emphasizing that the main chain’s finances operate independently. This approach allows for increasing returns with wider adoption, unlike one-time grants or licensing fees.

This system clearly benefits those who own the governance token. However, its impact on developers building within the platform isn’t as immediately apparent. The initial fee structure—a percentage of revenue—is beneficial when a project is small and terms are favorable, but it becomes costly as the project grows successful. A small percentage of minimal income doesn’t hurt, but ten percent of substantial earnings from a thriving platform is significant. Furthermore, this money goes to an entity that the developer originally needed permission from, and didn’t have control over setting the terms.

Comparing Arbitrum to app stores is useful. When app stores were new, developers accepted fees because there were no other options. Later, they fought over those fees in court and through complaints. The Arbitrum situation isn’t like that – developers have real alternatives, and the fees are transparent. However, the basic model is similar, and history shows that large developers eventually push for lower platform fees, often publicly.

Robinhood has become a major player on this platform. However, it remains to be seen if they’ll act responsibly, especially once the current financial support ends and their performance can no longer be dismissed.

What to watch

After October, we’ll get a clear picture of the company’s true earnings. That’s when the temporary gas subsidy ends, and the following quarter will be the first to reflect actual profit without artificial support. While sales volume and prices will both change – one up, the other down – the overall financial impact remains to be seen.

The success of Timeboost will show whether Robinhood sees value in capturing profits from prioritizing transactions (known as MEV), especially on a platform dealing with tokenized stocks. Using Arbitrum’s system could bring those profits into a revenue-sharing program, and the decision to implement Timeboost reveals how much Robinhood prioritizes transaction ordering income versus sharing it.

We’re looking to see if Robinhood has disclosed its financial relationship with Arbitrum in its official filings with regulators. Specifically, we want to know if they’ve identified this arrangement as something that could affect their business, either as a potential problem or something they rely on for income. If Robinhood publicly reported a revenue-sharing agreement with a decentralized autonomous organization (DAO), that document would be particularly important to examine.

The key question is whether these current fee settings will remain stable. The fees for the Expansion Program are determined by those who govern the Arbitrum network. Any attempt to raise or lower them would reveal how much influence a major Orbit tenant – and Robinhood is now one of the biggest – truly possesses.

If multiple competing brokerages use similar technology, they’ll all offer the same terms to customers. Currently, the focus is on how much companies like Robinhood pay for services. However, if this market splits across different platforms, the important question will shift to how much Arbitrum—or a similar platform—earns from an entire segment of the industry that it doesn’t directly participate in.

It’s important to understand why the way this story has been reported is significant. All the articles published so far have focused on how this deal would affect people who own the project’s token, specifically if the revenue share would be enough to increase its value. While that’s a fair question and led to accurate reporting, it created a key oversight. A revenue share impacts both sides – the project and those receiving the revenue – and only one side was ever really considered.

Often overlooked when analyzing crypto deals is the involvement of publicly traded companies, their legal disclosures, customer holdings, and governing boards. Robinhood’s connection to a specific blockchain network is now central to its business narrative – its stock value relies on this narrative – yet it carries an ongoing commitment to an organization that financial analysts following the company likely aren’t aware of. This difference in how crypto and traditional stock markets analyze deals is where valuable insights currently lie. Therefore, it’s crucial to examine every announcement within the crypto space and consider all parties involved. A similar pattern of platform ownership also appears in prediction markets, particularly where distribution, licensing, and customer relationships converge.

Frequently asked questions

What is the Arbitrum Expansion Program?

How much has Robinhood Chain actually paid?

Is the 10% calculated on gross or net revenue?

Why did Robinhood not just build its own chain from scratch?

Does the payment matter financially to Robinhood?

What is unusual about paying a DAO?

Does this give Robinhood any advantage over competitors?

What should investors watch?

2026-07-29 11:46