By TechFlow Yanz, Liam

Translator: Naetitia

"A good financier is 'the Robin Hood of finance'," a friend once described Vladimir Tenev.

This nickname would later inspire the name of a company that revolutionized the financial industry. But that’s not where the story begins.

The Foundation of Robinhood

Vladimir Tenev and Baiju Bhatt, the founders of Robinhood, met during a summer research program at Stanford University. Both had academic backgrounds in mathematics and physics, but neither could have predicted their future close ties with a new generation of retail investors. While they believed they were choosing the retail investors, in reality, the era chose them.

During his time at Stanford, Tenev grew disillusioned with the prospects of mathematical research. He was frustrated by the possibility of spending years on a problem only to achieve no tangible results. Moreover, he couldn’t understand why his Ph.D. peers were willing to toil for meager incomes. This dissatisfaction with traditional academic paths quietly planted the seeds for his entrepreneurial journey.

In the fall of 2011, the "Occupy Wall Street" movement was at its peak, with public dissatisfaction toward the financial sector reaching a crescendo. Protesters camped out in New York’s Zuccotti Park, their tents forming a mosaic of resistance. Even in San Francisco, Tenev and Bhatt could feel the ripple effects of this movement from their office window.

That same year, they founded Chronos Research in New York, a company specializing in high-frequency trading software for financial institutions. However, they quickly realized that traditional brokerages, with their high commissions and complex trading rules, were effectively excluding ordinary investors from the financial markets. This sparked a pivotal question: Could the technology used to serve institutions also empower retail investors?

Around this time, the emergence of mobile-first companies like Uber, Instagram, and Foursquare was reshaping consumer behavior. Yet in the financial sector, low-cost brokers like E-Trade were struggling to adapt to the mobile age.

Recognizing this gap, Tenev and Bhatt decided to pivot Chronos into a free stock trading platform tailored for millennials. They applied for a broker-dealer license, marking the beginning of Robinhood's journey.

Millennials, Internet application, and commission-free trading—Robinhood combined three of the most disruptive forces of the era.

At the time, neither founder could have foreseen the extraordinary decade that lay ahead for Robinhood.

Hunting Millennials: Robinhood’s Strategy to Target the Untapped Market

Robinhood set its sights on a blue ocean market that traditional brokerages had largely overlooked—millennials.

A 2018 survey conducted by Charles Schwab revealed that 31% of investors compare transaction fees when choosing intermediary platforms. Millennials, in particular, were highly sensitive to "zero fees," with over half of respondents indicating they would switch to platforms offering lower costs.

Against this backdrop, commission-free trading emerged as a game-changer. At the time, traditional brokerages charged $8 to $10 per trade, while Robinhood eliminated fees entirely and set no minimum account balance requirements. Users could start trading with as little as $1, a model that quickly attracted a wave of novice investors. Coupled with its intuitive, game-like interface design, Robinhood boosted user engagement and even cultivated a group of young investors who became "addicted to trading."

This shift in fee structures eventually forced the industry to adapt. In October 2019, Fidelity, Charles Schwab, and E-Trade announced they would also drop transaction fees to zero. Robinhood became the pioneer that carried the banner of commission-free trading.

Source: Orient Securities

The Design That Revolutionized Finance

Robinhood adopted Google’s 2014 Material Design framework, creating a gamified interface that even won an Apple Design Award, making it the first fintech company to receive such recognition.

While this was a significant milestone, it wasn’t the crux of Robinhood’s success.

In an interview, Tenev referenced a line from the movie Wall Street spoken by the character Gordon Gekko: “The most important commodity that I have is information.”

This phrase encapsulates Robinhood’s core business model—Payment for Order Flow (PFOF).

Like many internet platforms, Robinhood’s seemingly "free" service comes with hidden costs.

Robinhood profits by selling users' order flow to market makers, but users may not always execute trades at the best market price, mistakenly believing they benefit from commission-free trading.

In simple terms, when users place orders on Robinhood, these orders are not directly sent to public exchanges like NASDAQ or the NYSE for execution. Instead, they are forwarded to market makers partnered with Robinhood (such as Citadel Securities). These market makers earn profits by matching buy and sell orders with tiny price differences (often fractions of a cent). In return, market makers pay Robinhood a "referral fee," known as Payment for Order Flow.

In essence, Robinhood’s commission-free trading model generates revenue in ways that are invisible to users.

Despite Tenev’s repeated claims that PFOF is not Robinhood’s main profit driver, the reality tells a different story: In 2020, 75% of Robinhood’s revenue came from trading-related activities. By Q1 2021, this figure had risen to 80.5%. Although its share has slightly declined in recent years, PFOF remains a critical pillar of Robinhood’s income.

The Risks of "Barrier-Free" Trading

Adam Alter, a marketing professor at New York University, bluntly stated in an interview: “For companies like Robinhood, simply having users is not enough. You need to make them repeatedly click the ‘Buy’ or ‘Sell’ button, removing all barriers to making financial decisions.”

Sometimes, this extreme "barrier-free" experience brings not just convenience but also potential risks.

In March 2020, a 20-year-old American college student, Alex Kearns, engaged in options trading on Robinhood. Afterward, his account showed a loss of $730,000—far exceeding his $16,000 principal. Devastated, Kearns took his own life, leaving behind a note for his family that read: “If you’re reading this, I’m no longer here. Why is it that a 20-year-old with no income can leverage nearly $1 million?”

Robinhood’s design struck a chord with young retail investors: low barriers to entry, gamified experiences, and social features. It reaped the rewards of this strategy, with the average age of Robinhood users remaining steady at around 35 as of March 2025.

However, every gift from fate comes with a price tag, and Robinhood is no exception.

The Gamestop Storm

From 2015 to 2021, Robinhood’s registered user base grew by an astounding 75%.

The year 2020 was particularly remarkable. Amid the COVID-19 pandemic, U.S. government stimulus policies, and a nationwide investment boom, Robinhood saw both its user base and trading volume skyrocket. Assets under custody surged, briefly exceeding $135 billion.

However, alongside this explosive growth came mounting controversies.

Regulatory Scrutiny

At the end of 2020, the Massachusetts Securities Division accused Robinhood of using "gamification" tactics to attract inexperienced investors while failing to provide adequate risk controls during market turbulence. Shortly thereafter, the U.S. SEC launched its own investigation, alleging that Robinhood had failed to secure the best trade prices for its users.

Robinhood ultimately agreed to pay $65 million to settle with the SEC. The SEC bluntly stated that, even accounting for the benefits of commission-free trading, users collectively lost $34.1 million due to price disadvantages. While Robinhood denied the allegations, this controversy was merely the beginning.

The GameStop Saga

The real storm hit in early 2021 with the GameStop incident.

GameStop, a video game retailer that held nostalgic value for many Americans, faced financial struggles exacerbated by the pandemic. It became a prime target for institutional investors engaging in aggressive short-selling. However, thousands of retail investors refused to watch GameStop crumble under the weight of capital. They rallied on Reddit’s WallStreetBets forum, using platforms like Robinhood to collectively buy shares and launch a "short squeeze" against Wall Street.

GameStop’s stock price soared from $19.95 on January 12 to $483 on January 28, marking a staggering 2,300% increase. This grassroots financial rebellion shook the traditional financial system to its core.

But what appeared to be a victory for retail investors quickly turned into Robinhood’s darkest hour.

The financial infrastructure of the time was ill-equipped to handle the sudden surge in trading activity. Under the prevailing settlement rules, stock transactions required T+2 days for clearing, meaning brokers had to preemptively set aside margin collateral for user trades. The spike in trading volume sent Robinhood’s margin requirements to unprecedented levels.

On the morning of January 28, Robinhood CEO Vlad Tenev was awakened by his wife with alarming news: the National Securities Clearing Corporation (NSCC) had issued a notice demanding $3.7 billion in collateral. Robinhood’s liquidity was stretched to the brink.

Tenev scrambled to contact venture capitalists and secure emergency funding to prevent systemic risks from collapsing the platform. Meanwhile, Robinhood was forced to take drastic measures: it restricted the buying of "meme stocks" like GameStop and AMC, allowing users only to sell.

This decision ignited public outrage.

Millions of retail investors accused Robinhood of betraying its promise of "financial democratization," alleging that the platform had bowed to Wall Street interests. Conspiracy theories swirled, suggesting collusion between Robinhood and Citadel Securities—its largest order flow partner—to manipulate the market and protect hedge funds.

The backlash was swift and severe: online harassment, death threats, and review bombings flooded in. Robinhood went from being the "friend of retail investors" to the industry’s scapegoat. Tenev and his family were forced to retreat temporarily and hire private security.

On January 29, Robinhood announced it had secured $1 billion in emergency funding to maintain operations. Subsequent rounds of financing brought the total to $3.4 billion. Despite this, the company faced relentless scrutiny from lawmakers, celebrities, and public opinion.

On February 18, Tenev was summoned to testify before the U.S. Congress. Facing tough questions from lawmakers, he maintained that Robinhood’s actions were driven by settlement pressures rather than market manipulation.

Nonetheless, skepticism persisted. The Financial Industry Regulatory Authority (FINRA) launched a thorough investigation, ultimately imposing the largest single fine in its history—$70 million, comprising $57 million in penalties and $13 million in customer compensation.

A Turning Point

The GameStop saga marked a pivotal moment in Robinhood’s history.

The financial storm severely tarnished Robinhood’s image as a "champion of retail investors," damaging its brand reputation and eroding user trust. For a time, Robinhood found itself caught between the dissatisfaction of retail traders and the scrutiny of regulators, surviving precariously in a "no man’s land."

However, the incident also prompted U.S. regulators to reform settlement systems, accelerating the transition from T+2 to T+1 clearing cycles—a change with long-term implications for the financial industry.

In the aftermath of the crisis, Robinhood pressed ahead with its long-planned IPO.

On July 29, 2021, Robinhood debuted on the Nasdaq under the ticker symbol "HOOD," with an initial offering price of $38 per share and a valuation of approximately $32 billion.

Yet, the IPO failed to deliver the anticipated capital windfall. On its first trading day, Robinhood’s stock opened below its offering price, closing at $34.82—a decline of 8%. Although brief surges in retail enthusiasm and institutional purchases (e.g., ARK Invest) provided temporary relief, the stock’s long-term performance remained under pressure.

The divide between Wall Street and the market was evident—some saw Robinhood as a "gateway to the retail investment era," while others worried about its controversial business model and looming regulatory risks.

Robinhood stood at a crossroads of trust and skepticism, entering the harsh realities of the capital market.

Amid this turmoil, few noticed a subtle yet significant detail buried in Robinhood’s IPO prospectus. In its S-1 filing, the word "Crypto" appeared 318 times—a conspicuous frequency that hinted at a strategic pivot.

Behind the scenes, Robinhood was quietly unveiling a new narrative.

Crypto was poised to become the centerpiece of Robinhood’s next chapter.

Embracing Crypto

As early as 2018, Robinhood quietly dipped its toes into the cryptocurrency market by launching Bitcoin and Ethereum trading services. At the time, this move seemed more like a supplementary addition to its product lineup rather than a core strategic focus.

However, the market’s fervor soon changed everything.

In 2021, The New Yorker described Robinhood as "a zero-commission platform offering both stock and cryptocurrency trading, striving to be a progressive version of Wall Street with a mission to ‘democratize finance for all.’"

The data reflected the immense potential of this avenue:

• In Q4 2020, around 1.7 million users traded cryptocurrencies on Robinhood. By Q1 2021, that number skyrocketed to 9.5 million, marking over a fivefold increase in just one quarter.

• In Q1 2020, crypto trading revenue accounted for about 4% of Robinhood’s total trading revenue. By Q1 2021, this figure surged to 17%, and in Q2, it exploded to 41%.

• In 2019, Robinhood’s cryptocurrency assets under custody were valued at just $4.15 million. By the end of 2020, this number ballooned to $35.27 million—a growth of over 750%. Entering Q1 2021, assets under custody soared to $1.16 billion, a year-over-year increase of more than 2,300%.

By this point, cryptocurrency had transformed from a peripheral product into one of Robinhood’s revenue pillars, clearly positioned as a growth engine. As stated in its filings: "We believe cryptocurrency trading opens new avenues for our long-term growth."

But what caused Robinhood’s crypto business to explode within just a few quarters?

The answer lies in its S-1 IPO filing. Remember the Dogecoin mania of 2021? Robinhood was one of the driving forces behind it.

The S-1 document explicitly noted: "For the three months ended June 30, 2021, 62% of cryptocurrency transaction revenue was attributable to Dogecoin, compared to 34% in the prior quarter."

To cater to user demand, Robinhood announced in August 2021 plans to introduce cryptocurrency deposit and withdrawal functionality, allowing users to freely transfer assets like Bitcoin, Ethereum, and Dogecoin in and out of wallets.

Six months later, at the LA Blockchain Summit, Robinhood unveiled the beta version of its multi-chain Robinhood Wallet, which became available to iOS users in September 2022 and fully launched in 2023.

This marked the beginning of Robinhood’s transformation from a "centralized brokerage" into a "digital asset platform."

However, just as Robinhood accelerated its crypto-driven transformation, a man with a legendary reputation at the time turned his gaze toward the company—Sam Bankman-Fried (SBF).

The then-prominent founder and CEO of FTX was known for his aggressive expansion strategies and disruptive ambitions in the financial sector.

In May 2022, SBF, through his holding company Emergent Fidelity Technologies, quietly acquired about 7.6% of Robinhood’s shares, valued at approximately $648 million.

When the news broke, Robinhood’s stock price surged over 30% in after-hours trading.

In his 13D filing with the U.S. Securities and Exchange Commission (SEC), SBF stated that he purchased Robinhood shares because he considered it "an attractive investment" and pledged that he had no current plans to seek control or interfere with management. However, the filing also left room for "potential adjustments to ownership intentions based on future circumstances," providing ample flexibility for action.

In reality, SBF’s move was unlikely to be a simple financial investment.

At the time, FTX was actively expanding into the U.S. regulatory market, seeking to shed its identity as a "pure crypto exchange" and infiltrate traditional financial and securities businesses. Robinhood, with its massive retail user base and regulatory credentials, was the ideal bridge for this ambition.

Rumors swirled that SBF intended to push for deeper collaboration with Robinhood, possibly even exploring an acquisition. Although SBF publicly denied these rumors, he never ruled out the possibility of such moves in the future.

The Collapse of FTX

Unfortunately, SBF’s grand plan never materialized into the envisioned "win-win" scenario.

By late 2022, FTX collapsed spectacularly, and SBF faced charges of fraud, money laundering, and financial crimes. In January 2023, the U.S. Department of Justice formally seized approximately 56 million Robinhood shares held by SBF through his holding company, valued at around $465 million at the time.

What was once a symbol of "crypto-financial alliances" ultimately became a hotly contested legal asset.

On September 1, 2023, Robinhood repurchased the shares from the U.S. Marshals Service (USMS) for $605.7 million, finally eliminating the potential risk posed by SBF’s stake.

Ironically, based on Robinhood’s current valuation of $86 billion, the 7.6% stake SBF once held would now be worth approximately $6.5 billion—more than a tenfold increase from its original cost.

It turns out that the "attractive investment" SBF identified was indeed enticing enough, though his downfall prevented him from reaping its full rewards.

From Crisis to Crown

If the GameStop saga was Robinhood’s baptism by fire, then 2025 marked the company’s long-awaited moment of glory.

The signs were evident well before this pivotal year.

In Q4 2024, Robinhood shattered expectations across all key metrics:

• Assets under custody, net deposits, Gold subscription users, revenue, net income, adjusted EBITDA, and earnings per share all exceeded forecasts.

• Quarterly revenue surpassed $1.01 billion, with net income reaching $916 million. Gold subscribers grew to over 2.6 million, and adjusted EBITDA hit $613 million.

• Cryptocurrency trading volume soared to $71 billion, with crypto-related revenue experiencing a staggering 700% year-over-year growth, generating $358 million in a single quarter.

During the Q4 earnings call, Robinhood’s co-founder Vlad Tenev hinted at the company’s ambitions: “We see immense opportunities ahead as we strive to enable anyone, anywhere, to buy, sell, or hold any financial asset and execute any financial transaction through Robinhood.”

This statement was more than just a passing remark; it was a subtle foreshadowing of what was to come.

The First Spark

On February 14, 2025, just two days after the earnings report, Robinhood’s stock price hit its first peak of the year at $65.28.

But the true catalyst for the stock’s meteoric rise was the convergence of global financial and crypto market dynamics.

With Donald Trump’s election and the U.S. government adopting a "crypto-friendly" stance, Robinhood’s regulatory risks began to dissipate.

On February 21, 2025, the U.S. SEC Enforcement Division officially notified Robinhood Crypto that it had concluded its year-long investigation into the company’s crypto operations, custody processes, and payment for order flow practices. The SEC decided not to pursue any enforcement actions.

This letter not only cleared Robinhood’s path for future crypto business expansion but also served as a crucial catalyst for the stock’s breakout rally.

A Game-Changing Acquisition

Robinhood wasted no time capitalizing on the momentum.

On June 2, 2025, the company announced its $65 million acquisition of Bitstamp, one of the world’s oldest cryptocurrency exchanges.

Rebranded as "Bitstamp by Robinhood," the exchange was seamlessly integrated into Robinhood Legend and Smart Exchange Routing systems. This strategic acquisition gave Robinhood access to compliant assets and a foothold in global markets, elevating it from a retail brokerage to a serious contender among global crypto exchanges like Coinbase and Binance.

The market responded immediately. By the next day, Robinhood’s stock price had surged past $70.

Entering Web3 Capital Markets

If the Bitstamp acquisition marked Robinhood’s expansion into international markets, its next move signaled its bold entry into the Web3 capital landscape.

Remember Tenev’s earlier remark about enabling “anyone, anywhere, to transact any financial asset”? Robinhood took this vision a step further.

On June 30, 2025, the company announced its foray into blockchain-based securities trading. European users could now trade over 200 U.S. stocks and ETFs—including household names like Nvidia, Apple, and Microsoft—via tokenized assets on the Arbitrum network.

In addition, Robinhood unveiled plans to develop its proprietary Layer-2 blockchain, dubbed "Robinhood Chain."

The market’s reaction was swift and resounding. Robinhood’s stock price skyrocketed, gaining 46% within a month and peaking at $100 during intraday trading on July 2, 2025—a historic high for the company.

Although the market briefly corrected due to rumors of OpenAI equity tokenization being debunked, analysts widely agreed that Robinhood had successfully transformed itself from a “retail brokerage” into a “fintech platform.” Blockchain-based securities were poised to become its next long-term growth engine.

As of now, Robinhood’s stock price remains steady at around $100, with a year-to-date gain of nearly 150%. Its market capitalization has surged past $88 billion, far exceeding expectations from its IPO days.

Robinhood’s journey—from being the “villain” of the 2021 GameStop frenzy to becoming a trailblazer in the fusion of finance and crypto—has been nothing short of remarkable. Over five years, the company has not only weathered the storms of the capital markets but also undergone a rapid and transformative reconstruction.

If history once chose Robinhood, today Robinhood has become the player capable of shaping history.

Vlad Tenev, reflecting on his college days when he worried about pursuing mathematics as a career, might now say: “You spent years exploring a specific problem, and it turns out, it wasn’t all for nothing.”