Bankless - Robinhood's Crypto Pivot with Vlad Tenev, Co-Founder, CEO

Episode Date: May 19, 2022

Robinhood's Co-Founder & CEO, Vlad Tenev announced some major news at Permissionless earlier this week. Robinhood is diving deep into crypto and web3! How so? When's the big roll-out? Hear all about it and so much more in the interview. P.S. It's Ryan and David's FIRST in-person interview! You don't want to miss it, anon. Trust. ------ 📣 ALCHEMIX | Get a self-repaying loan today! https://bankless.cc/Alchemix  ------ 🚀 SUBSCRIBE TO NEWSLETTER: https://newsletter.banklesshq.com/  🎙️ SUBSCRIBE TO PODCAST: http://podcast.banklesshq.com/  ------ BANKLESS SPONSOR TOOLS: ⚖️ ARBITRUM | SCALED ETHEREUM https://bankless.cc/Arbitrum  ❎ ACROSS | BRIDGE TO LAYER 2 https://bankless.cc/Across  🏦 ALTO IRA | TAX-FREE CRYPTO https://bankless.cc/AltoIRA  👻 AAVE V3 | LEND & BORROW CRYPTO https://bankless.cc/aave  ⚡️ LIDO | LIQUID ETH STAKING https://bankless.cc/lido  🔐 LEDGER | NANO S PLUS WALLET https://bankless.cc/Ledger  ------ Timestamps: 0:00 Intro 4:53 Wen Vlad & Robinhood Got Cryptopilled 7:55 Why Self-Custody 9:09 Robinhood 3 12:15 Chromatic Feedback & Other Features 14:03 Why the Crypto Pivot? 20:37 Utility of Robinhood’s Non-Custodian Wallet 26:04 Cannobolization Threat? 27:32 Robinhood’s Seriousness, Culture, & Demand 30:44 Robinhood Crypto Users 32:28 Robinhood 3’s Case for Normies 34:56 What’s Next ------ Resources: Vlad Tenev https://twitter.com/vladtenev  Robinhood 3 https://robinhood.com/web3-wallet  ----- Not financial or tax advice. This channel is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This video is not tax advice. Talk to your accountant. Do your own research. Disclosure. From time-to-time I may add links in this newsletter to products I use. I may receive commission if you make a purchase through one of these links. Additionally, the Bankless writers hold crypto assets. See our investment disclosures here: https://newsletter.banklesshq.com/p/bankless-disclosures 

Welcome to Bankless, where we explore the future of internet money and internet finance. This is how to get started, how to get better, how to front run the opportunity. This is Ryan Sean Adams. I'm here with David Hoffman in freaking person. Yo! And we're here to help you become more bankless. Did that from memory, David. Nice job, man.

Nice job. Who do we have on today? What are we talking about? Yeah, we had Vlad 10 of the CEO of Robin Hood. And we, of course, are doing this at permission list because right before Vlad came into our makeshift podcast booth. He did a, they did a press release for a non-custodial wallet coming out of Robin Hood. So they are calling this Robin Hood 3, which I thought was Robin Hood Web 3, but it's actually

Robin Hood, the third evolution, which Vlad goes into in the podcast as well. So we try and pick his brains about what some of the features are in this Robin Hood 3 app. He leaks a little bit. You can kind of see a little bit of what's going on there, but he mainly keeps things mostly under wrap, except for the stuff he leaks. Yeah, at a high level, I think it's super exciting that they are going into the self-custodial wallet space. I've got to say, I didn't expect them to do it so soon. Yeah.

Right? I anticipated some of the fintechs who've created entire business models on being centralized to prefer that model. And now here, Robin Hood is going to the self-custy space, effectively encouraging all of their users to get crypto-pilled and they go bankless. Right. So that's a step in it of itself. I think there are a lot of details that we'd love to, uh, learn like what layer twos are going to be supported, what other chains, how are you actually going to support all of the assets that they mentioned supporting Bitcoin, Litecoin, Ethereum, ERC 20 tokens.

Where do the swaps happen and how do the swaps? Exactly. Our contract wallet, how are keys restored, all of these things. And hopefully these questions will be revealed in time. But we've kept this conversation surface level and high level. And I think the big takeaway is Robin Hood has planted a flag in the ground. They are coming to crypto. They are investing in it. And they're actually doing some bankless things. So that in and itself is pretty exciting, David. Yeah. And I think this is basically the business model for all banks, right? Like, which one of you is going to disrupt yourself first? Yeah. And Robin Hood says, like, all right, we'll do it. And like, we'll get out of the way. And so that's kind of the TLDR, I would say, is Robin Hood is going to disrupt themselves first.

And so that they can actually produce their own product that ultimately comes to disrupt themselves. Dude, I enjoyed doing an in-person podcast you do. That was great. It was really good. David and I on camera at the same time, in-person, interviewing Vlad. That's what you're in for in this episode. We're going to get right to the episode with Vlad. But before we do, we want to thank the sponsors that made this episode possible.

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And also check out the AVE protocol governance forums to see what more than 100,000 Dow members are all robbing about at governance.ave.com. Bankless station, we are super excited to introduce you to Vlad Tennev. He's the CEO and co-founder of Robin Hood. excited to have this conversation. Also excited, David, this is our first in-person podcast that we've ever done. So we found some space at Permission List. We're reporting this live with Vlad after the keynote that you just gave. Vlad, welcome to Bankless. Thanks for having me, guys. And I'm glad we're all meeting for the first time. So it feels like a level playing field.

You know, I almost feel like saying, like, welcome to crypto as well. But I know Robin Hood has been in crypto for a while. I guess my first question is, when did you guys decide to get super serious about crypto? Because the things that you're releasing today are taking you to the next level. We'll talk about what you've just announced, what you're planning the future. But when did you fall down the rabbit hole? When did Robin Hood get serious about crypto? Well, let's see. I've been into crypto for quite a while, just personally, as an individual.

I remember trying my hand at Bitcoin mining back in 2011 with a CPU and, you know, seeing, seeing the first time that Bitcoin, it wasn't even crypto at that point, right? It was just Bitcoin was declared dead after the Mount Gawks password breach. So a lot of people were like, oh, well, that was a fun experiment while it lasted, right? no way could have recovered from this. But then, of course, you had the first kind of Bitcoin summer in 2013, prolonged winter. People declared it dead again. And then 2017, 2018. So I think the Robin Hood as a company got into crypto in 2018. So early 2018, when it became clear, we started hearing from our customers that,

hey, this is an asset class that we want to have. have as part of our portfolios. We want to invest in it. We want to trade it. We were looking at kind of the broader space and seeing an opportunity to do the same thing that we've done for stock trading, which is fee compression and obliteration and get more value back in customers' pockets. So that's what led us to launch Robin Hood Crypto back in early 2018, which was I think the first major commission-free offering for crypto by kind of an established company. So that got us into it. And then I guess you might ask, why self-custody? Why is that interesting to us? Because that is what you're announcing, right? Yeah. We're announcing Robin Hood 3, which is self-custody,

done the Robin Hood way. So no network fees, no commissions, really bringing design to the forefront. And I think what's interesting about it is you look over the past couple of years, you know, five years ago self-custody meant getting your treasurer or your ledger, putting your coins on it, and forgetting about it, right? Maybe you take it out once a year or even less frequently to move coins around, move them to an exchange. But the number of rich applications that you can do while maintaining custody and ownership of your keys over the past couple of years that have just sprung up has been really awesome to see.

So Robin Hood, obviously we've been watching the space. And I think they're now at the point where they're ready for a broader audience. And we felt like we could build a really, really good product here, taking our two value propositions of low costs and amazing design and deliver that to customers. And I'm really, really excited for this. And since you've been paying attention to the crypto industry, it seems like Robin Hood has been waiting for its moment to pounce. And it seems like this is the moment. So we have a Robin Hood wallet, Robin Hood three named after Web 3. Is that the three in Robin Hood? Yeah, I think Web 3 is an obvious allegory. I think there's also a reflection of kind of the different stages of Robin Hood. The first stage could be when we offered equities trading. And then the second stage, when we got into crypto back in 2018, but, you know, it was a custodial offering. We didn't even offer the ability

to deposit and withdraw until last year. So customers were really happy to go there. And then self-custody the Robin Hood way with Robin Hood 3. So I want to get into the technical detail. So how does that, how does that work? What does that, while it look like, how does the user begin to custody their own assets? How do they get their private keys out of Robin Hood? And if they are buying assets from Robin Hood, in the app, how does that go to the user's wallet while they also maintain their own private key? Like, can you just walk us through this, the whole scope of the wallet? Yeah. So, I mean, I can't share too many of the details just yet because I want to, I want to keep it a surprise. I want to keep you guys in suspense. But I'll tell you some of the principles

that we, we kind of brought to the four when we designed the product. I think that the first thing is we want to make it simple to onboard while keeping best in class security. So security, privacy, very important. That's why people are self-custodying to begin with. But you look at some of the some of the ways to set up a non-custodial wallet. You have to type in and transcribe the 24 words and it tells you to write them down on a piece of paper. We think that we can make that process a lot simpler and a lot more streamlined. Because that scares almost everyone who does not get into crypto. Yeah, if you're, if you're a protocol developer, it's fine.

You understand what's happening. You understand private public key cryptography. And it is a little bit of a step forward. It's like one step beyond just giving you the private key, right, and having you record that. But I think we could do better. The second thing is just the design and the simplicity. a lot of these products are built using non-native protocols. So they feel slow, right?

It's like you're either directly loading a web page or loading an interface that's powered by a web framework. So we want to make sure it feels really fast. And you feel connected to your money and it's tactile. And so we're building native. We also are introducing a new gesture. You might have heard my co-founder talk about it on stage, which we call chromatic feedback, which is going to be really, really cool.

And it's going to, yeah, it's going to feel very tactile. You saw a little hint of it, but I think when you play with the product, it'll feel really good. For the listeners that weren't able to watch you, the speak at the target permission list, can you actually go into that, what that is? Yeah, what is cromatic feedback?

What is that? Well, basically, it's a response to the touch that the interface gives. And it's hard for me to describe it on audio, but you just have to see it to believe it. And I think people really, really like it. So we're talking about like the iOS Android app has like a unique tactile feedback while using it.

That's unique. Exactly. Cool. Neat. And then the other thing is we really don't love the whole web browser thing where you load up a web browser in your non-custodial wallet and you get some web page that you have to, you know, zoom in and out of. So we want to make it really easy, not just to swap,

but also to access defy protocols and generate yield, all with native UI. So we're going to be building that. And we're going to use multiple high-speed chains. We want to make sure people have different ways of getting access to different tokens and different services. So that's something we're quite excited about as well. Okay.

multiple high-speed chains. That brings to mind like the fast layer ones and also layer two's as well. Layer two is on Ethereum and other chains? We're looking at everything, yeah. Cool. Okay. Haven't domiciled yourself into any one specific chain yet? Well, I mean, there's lots of chains that we like.

But yeah, we're always open to adding more. And I think part of the reason we're excited to be here is, you know, there's a lot of DAP developers and other folks that we could talk to. And, you know, we're very happy to. have some of them start reaching out already even in the hour or so since the keynote. Sure. What's super cool about this, too, is I think you mentioned it earlier, but users want to do more than hold crypto.

Obviously, there are all of these other verbs that you can do with crypto, and particularly with defy. So you want to invest, you want to buy, you want to hold, of course, you also want to trade. You also want to earn yield. All of these different verbs. And I noticed in your press release, you were talking about. talking very much, not just about the hold use case in your crypto wallet, but like generating yields. I'm wondering if you talk about that. But also before you do, what I want to get like

the big picture here for Robin Hood because you said this is sort of the third phase of Robinhood, which I think that's pretty big, right? I mean, like you guys get into equity space, that was big, getting into crypto, it's the second phase. That was big. And I will tell you, like, to this podcast is called bankless, right? Yeah. Because we are, about like disrupting the intermediary. Okay. So what we don't want in crypto is to have crypto turn into something like the traditional banking system where it's less peer to peer.

We have to go through all of these intermediaries. So while we were very happy in kind of your phase two that you guys were like listing crypto assets, we also like kept applying the pressure and wanting Robinhood, wanting users of Robin Hood to petition Robin Hood and say, hey, get us the withdrawal capability. so we can withdraw from the banking system if we want to and take custody of our assets. And to your credit, you guys did that earlier, I guess last year, you started doing that, which was phenomenal. But this one took me by surprise in like a good way, like a way that I'm very excited about

because it strikes me that you are seeing the full vision of crypto, which is more than just creating a fintech overlay on top of this ledger blockchain infrastructure, but also providing like peer to peer or, you know, individual to protocol types of interfaces. Like doing the self-custody thing, I think is a big step. And you guys should be commended for that. But I'm wondering why. What's the thought process here? Do you see this is where the industry is going?

Do you see this is maximally beneficial to your users? Is there some kind of profit motive? Why are you doing this? Yeah, I guess there's two questions, right? there's the why and then there's kind of why now. So in terms of the why, if you look at why Robin Hood has been able to do what we do, it's it's because there's sort of two things that we've been able to accomplish because we hold them very, very dear. One is using technology to actually eliminate middlemen and costs from from the system, pass back that value to

customers in the form of lower fees and no commissions. And the other is create design that's accessible and makes it very, very easy for a customer and not just kind of a defy believer, but a customer that maybe is curious, but hasn't gone down the rabbit. Not a crypto native. Yeah, not a crypto native. So we want to make sure that our interfaces are.

are obviously useful and people who are believers love them, but also normies do as well. So what did stock trading, how do you look at that in the context of stock trading, right? Well, 20 years ago, it used to be that to place a stock trade, you had to go to a physical broker and your trade would be be beamed down to the floor of the New York Stock Exchange. And you had these people with like these iPads before there were iPads actually, actually making the trades happen. That's why there was a cost to it because there was an actual human being in the, in the middle of the transaction. And, you know, between 20 and 10 years ago, that all went away. So if you go to the New York Stock Exchange now, it's like a media place, right?

maybe there's some people trading, but most of the time it's just CNBC and some of the networks doing interviews because it's a museum. All of the action is happening in servers on the other, on the other side of the Hudson River. So that part, that's an example of something very, very manual that was replaced by software and people benefited from it, right, in the form of lower costs. Now, I think what's got us particularly interested about crypto and defy is that you're seeing that go down the stack. So I think you've heard us say a few times that crypto is not just another asset class, but it's really almost like an entirely new operating system for financial services. So, you know, we've done some stuff with stock trading that replaces a lot of the things. in the front of the house with software. Now, crypto, you're starting to see the back of the house,

the sort of underbelly of the financial system being replaced by blockchains and protocols. And I think what's really interesting, you put these two things together. The end-to-end chain, the entire product experience could potentially be replaced by software. And that's an immense opportunity to pass back not just security and privacy, but more value back into the, the the hands of consumers. So I think that's why we're interested in it. It goes to the heart of the genesis of Robin Hood, which is using technology to make financial services low cost and applying design to make them ridiculously easy to use and simple for customers. You know, we actually have a term for what you just described. We're talking about the front

of the house and the back of the house. We call it the defy mullet thesis, right? And the idea is it's going to be like fintech on the front for user acquisition, smoothing the rough edges, making self-custodial wallets, not custodial wallets, amazing. That's going to be defy in the back. And so our thesis has been, and we saw this starting to happen a couple of years ago, that more and more fintech companies would essentially grow out their defy mullets, right? Begin to start swapping out the old banking infrastructure for like crypto ledger-based systems. And it's so cool to see Robin Hood taking a giant leap into that space. So well done. I guess the other follow-up question is,

so what sort of things will users be able to do with that non-custodial wallet besides the whole? So we were just alluding to it like yield? Like defy? What other things can we do inside this? Well, so there's a couple of things that we know customers love and want from talking to them. So swapping and trading is a big part of it

to be able to actually place trades without giving up control over your keys. So that's what we start with. Obviously, Robin Hood is known as a place where people can invest in trade. And we want to bring that to self-custody with Robin Hood 3. And just to be clear, that means integrations with the chains that the app that the wallet talks to and using the defy swap features and swap applications on those chains. Or is that something that Robin Hood itself will be also facilitating as well?

How does the swap actually happen? I think the details under the hood again, I think we'll probably reveal more as we get closer to the product delivery. But from a customer standpoint, it's just you, software, and the blockchain. And the goal will be to actually make it so that you're all in cost of swapping is competitive, if not significantly better than the most competitive centralized exchanges. So typically, you know, when you're trading on these dexes, you see, you know, high gas fees, sometimes low liquidity. It's unclear exactly what the exchange rate that you're swapping is. So we see lots of problems that we can help solve there. Ave is the leading decentralized liquidity protocol.

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Go to bridge.arbitrum.com.com now to start bridging over your eth and other tokens in order to experience defy and empties in the way it was always meant to be. Fast, cheap, secure, and friction-free. One of the other questions I have is how user and customer funds will actually end up in the wallet. So how does it interface with the current Robin Hood app? And if users want to get their Bitcoin, their ether, their tokens into their non-custodial wallet, is there like a Fiat on ramp that is built by Robin Hood right in there? Well, I think the really interesting thing about Robin Hood crypto inside the main Robin Hood app is that it is a great on-ramp for crypto. right? You can you can bring in your fiat currency or dollars. You can buy and sell crypto and we offer

an increasing number of coins. We just added some new ones a couple weeks ago actually. And with with the custodial wallets that we launched a few months ago, you can actually deposit and withdraw and take them directly onto the chain. So certainly that gives us the ability to drive an integration from Robinhood and use that as as a key on ramp. Okay. Vlad, are you worried at all about this offering cannibalizing your existing business? And so, I mean, there are multiple ways to see it. I mean, obviously you're not or you're weighing the risk and you're saying,

hey, the rewards are worth more than risk. And I'm wondering if you could weigh in on this. But it sort of reminds me of the, you know, the Apple play in the 2000 era where you had the iPod, an Uber successful product, right? Like incredible. And then Steve Jobs goes and turns that iPod into an app on a phone, makes music basically an app. And the question is like, well, is that going to cannibalize all of the iPod sales?

And he was like, yeah, but we'll more than make up for it on our sales of iPhones and in the app store. Is that what you're seeing here? Or do you think that there could be, you know, some threat to your existing business model because you're getting into defy and margins get compressed. If there are any threat of cannibalization, what do you think about this? I think it's always best to cannibalize yourself, right? And we don't really even think about it that way.

We think about rolling out the best products and, you know, the monetization and the revenue will take care of itself. If this is so, if this becomes, you know, the dominant way that customers access Web3 and it's drawing people away from Robin Hood. I think that's a great scenario, not just for the ecosystem, but also for Robin Hood as well. Can we take a peek behind what's going on with Robin Hood's own resources? Are you guys getting into this like 5% of your guys' time and energy,

25% of your time and energy? Like how serious is Robin Hood about this whole defy crypto campaign? Yeah, we've been growing our crypto team in general quite heavily. started out as a very small, very small lean team. And, you know, we've been putting a lot of resources to bear on this. But I would say, you know, we don't really look at it in terms of headcount. I think especially when you're starting, when you're starting something new, a smaller team can move really, really fast and iterate in a way that sometimes even larger teams that are resourced can't. So we're excited that it's a new app.

It allows us to kind of reimagine and learn from things we've done with the first Robin Hood. And we think it'll actually, there's probably things that we'll learn with Robin Hood 3 that eventually will be talking about backporting. So there's always like a big difference between how crypto natives see the products that they use and design their products that they use versus people that aren't as familiar with crypto. So like what's the Robin Hood culture when it comes to like crypto native builders on the Robin Hood side of things? Do you have a lot of crypto natives at Robin Hood? We do. We have lots of crypto natives. But when we we have a big culture of talking to customers and putting the prototypes of what we build in front of them and getting their feedback. And we make it a point to not just talk to crypto native people, but actually to people that are curious and, you know, normies, as you put it.

and we want to make sure it works for them also. And I'm sure along the process, as this app gets rich and the ecosystem around this app gets built out, you take Robin Hood Normies to Robin Hood Cryptonatives. Is there any sort of insight or illustration as to the demand for this product out of Robin Hood users? Is there anything like any customer feedback they say, it's like, oh, they really want this kind of product?

Well, you see it certainly in some of the commentary about Robin Hood, like people were requesting wallets in general and access to their coins and we heard that loud and clear throughout the past year and now I think I think this release will probably surprise a lot of people if it surprised you guys I'm sure that not a lot of people thought that Robin Hood would go and embrace self-custody the way we have today but I think it makes a lot of sense it's the future of, I think the future of Web 3 relies on this. And we can really build something awesome that allows people to keep custody and be their own bank, you know, to the tune of why you named your podcast.

I think that's a very, very powerful vision. And especially with what's happening around the world, you see, you see it's never been as important to have that security and privacy as it is right now. What are Robin Hood users like? So, first of all, how many users are on the platform now? It's like 25 million-ish, something like this? I think the last number we reported was around 22.8 million funded accounts. Okay, wow.

Okay. And how many of these are dabbling with crypto, own crypto assets, have their own private keys, maybe have a separate self-custody wallet? Have you guys done any studies on this? What we're trying to understand is how many of the user base will be kind of net new? this is their first crypto experience and what the interest level is. Quite a few crypto, first time crypto buyers use Robin Hood. We have a combination of both.

We have people that use, that are very deep into it and use Robin Hood as a cheap and convenient off-ramp and on-ramp, and then they move it elsewhere to generate yield or to engage in, to use DAPs. And we also have people that just want exposure. to it and like having it alongside their stocks and are sort of thinking about it as portfolio diversification into a different asset. And I think what we'd like to do is is better serve both kinds of customers. So if you just want to use us as an on-ramp and off-ramp, we'd like to serve you further down the line and give you all of the other tools that you're going outside of Robin Hood to use as well. If you want to use us as

a way to just diversify your portfolio. That's something that we offer. And obviously, with our centralized offering, we can make it a great experience to keep your coins in the same app as your equities and other securities as well. So, Vlad, as we think about wrapping this up in closing, I know we've all got places to be. It's very busy at permissionless, of course. I'm wondering if you could give the case to sort of two groups of people, right? So of course, there's the crypto natives who listen to bank lists all of the time, and they're probably excited about this, but also at the same time, you know, maybe skeptical, right? Because Robin Hood is coming from more the fintech side of things. And then there's also your existing users, right, who are

a little worried about crypto potentially, like opening a metamask wallet. There's a lot of rough edges, the 24 words. First, can you make the case to your users, the Robin Hood, you know, Normies, let's call them, the people who are into fintech, buying equities, buying crypto and exchange, why should they go in the direction of a self-custy wallet? Why is this Robin Hood 3 application for them? Yeah, I think that if you are, and it's not necessarily going to fill the needs for 100% of our customers, right? There's customers that are probably very happy just buying Bitcoin or the main coins and keeping them alongside their their securities. And we think that's fine. If you don't want to self-custody, we're not, we're not necessarily going to want to force you to do that. But there are

a lot of people that are attracted by getting access to more coins. They're attracted by by these daps and generating yield, especially in this high inflation environment. And we want to offer a solution to them. And I think the value prop, if you're a customer of Robin Hood, is you get the same simple design and the low fees that you're accustomed to with Tradfai products like Robinhood, and we'll import that and make the experience absolutely seamless. Now, if you're a non-Robinhood user, the same value prop resonates with you, right? You're used to the swapping experience where the exchange rate's not clear. You're paying high gas fees. It's hard to work with multiple chains. Sometimes you send crypto to the wrong places and lose access to it, and that really sucks.

So Robin Hood can actually take a lot of the problems that you run into with the non-custodial wallets that you're already using and make them go away. So what's next, Vlad? This product, as I understand, is in sort of a beta-type season. We'll be starting the beta and rolling it out to the first customers in the coming months, so later this summer. And then the goal is to get it in everyone's hands later this year. And more announcements to come, it sounds like. It seems like you were teasing some things in this episode that are to come. So I'm sure many more features to be added. Like when does the project go GA and become complete? Are there a certain amount of features? Well, we'll be rolling it out to everyone later this year. Of course, it's software. So

by its nature, it's, we're going to continue to add stuff once we get to GA. But the goal is to get it in everyone's hands, get it in the first people's hands over the next few months and in everyone's hands by the end of the year. Thanks a lot. bullish. Bankless listeners, this has been fantastic. It's 2022. I can't believe I'm saying this, but Robin Hood is helping us onboard the world,

helping the world go a bit more bankless. It's great to have you guys here. Vlad, thanks so much for spending some time with us on this podcast. Thank you, gentlemen. We appreciate you. Yeah. Appreciate the time.