From grassroots to a market capitalization of 600 billion, the ten-year legendary journey of Robinhood

A friend once described Tenev as "the Robin Hood of finance." This nickname later became the name of a company that changed the financial industry. But this is not the beginning of the story.

Tenev and Baht met at Stanford University. Neither of them anticipated that they would become deeply intertwined with a generation of retail investors in the future. They thought they chose retail investors, but in reality, it was the era that chose them.

During his studies at Stanford, Tenev began to doubt the prospects of research in mathematics. He grew tired of the academic life that involved "spending years delving into a problem, only to potentially achieve nothing" and could not understand why his doctoral classmates were willing to toil away for meager incomes. This reflection on traditional paths quietly planted the seeds for his entrepreneurial journey.

In the fall of 2011, coinciding with the peak of the "Occupy Wall Street" movement. That same year, they founded a company in New York called Chronos Research, developing high-frequency trading software for financial institutions.

However, they soon realized that traditional brokers kept ordinary investors out of the financial markets with high commissions and complicated trading rules. This made them start to think: Can technology that serves institutions also serve retail investors?

Tenev and Baht decided to transform Chronos into a free stock trading platform aimed at millennials, in line with this wave of technology and consumerism, and applied for a brokerage license.

Millennials, the internet, and free trading - Robinhood has gathered the three most disruptive elements of this era.

At that time, they did not anticipate that this decision would open up an extraordinary decade for Robinhood.

Hunting the Millennial Generation

Robinhood set its sights on a blue ocean market that was ignored by traditional brokerages at the time - the millennial generation.

Zero-commission trading emerged against this backdrop. At that time, traditional brokers typically charged $8 to $10 per trade, while Robinhood eliminated this fee entirely and set no minimum account balance requirements. The model that allows trading for just one dollar quickly attracted a large number of novice investors. Coupled with a simple and intuitive interface design that even has a "game-like" feel, Robinhood successfully enhanced user trading activity and even cultivated a group of young users who became "addicted to trading."

This transformation of the fee model ultimately forces the industry to evolve. In October 2019, Fidelity, Charles Schwab, and E-Trade successively announced that they would reduce commissions for each trade to zero. Robinhood became the "first" to champion the banner of zero commissions.

Adopting the Material Design style launched by Google in 2014, Robinhood's gamified interface design even won an Apple Design Award, becoming the first fintech company to receive this honor.

This is part of success, but it is not the most critical aspect.

In an interview, Tenev described the company's philosophy by paraphrasing a line from the movie "Wall Street" spoken by the character Gordon Gekko: The most important commodity I own is information.

This sentence reveals the core of Robinhood's business model – payment for order flow (PFOF).

Like many internet platforms, Robinhood seems to be free, but in reality, it comes at a higher cost.

It profits by selling the flow of user trading orders to market makers, but users may not be able to execute at the best market price, thinking they are benefiting from zero commission trading.

In simple terms, when users place orders on Robinhood, these orders are not sent directly to the public market (such as NASDAQ or the NYSE) for execution; instead, they are first forwarded to market makers that partner with Robinhood. These market makers profit by matching buy and sell orders at a very small price difference (usually a difference of one-thousandth of a cent). In return, the market makers pay Robinhood a payment for order flow.

In other words, Robinhood's free trading is actually making money "in places that users cannot see."

Despite founder Tenev's repeated claims that PFOF is not a source of profit for Robinhood, the reality is that in 2020, 75% of Robinhood's revenue came from trading-related activities, and by the first quarter of 2021, this figure rose to 80.5%. Even though the proportion has slightly declined in recent years, PFOF remains an important pillar of Robinhood's revenue.

Adam Alter, a marketing professor at New York University, candidly stated in an interview: "For companies like Robinhood, simply having users is not enough. You have to keep them clicking the 'buy' or 'sell' buttons, lowering all the barriers people might encounter when making financial decisions."

Sometimes, this extreme experience of "lowering barriers" brings not only convenience but also potential risks.

In March 2020, 20-year-old American college student Carnes discovered that his account showed a loss of up to $730,000 after trading options on Robinhood—far exceeding his $16,000 principal. This young man ultimately chose to take his own life, leaving a note to his family that read: If you are reading this letter, I am no longer here. How could a 20-year-old with no income access nearly $1 million in leverage?

Robinhood has accurately tapped into the psychology of young retail investors: low barriers to entry, gamification, and social attributes, while also reaping the rewards of this design. As of March 2025, the average age of Robinhood users remains stable at around 35 years old.

But everything that fate offers comes with a price tag, and Robinhood is no exception.

Robin Hood, rob from the poor to give to the rich?

From 2015 to 2021, the number of registered users on the Robinhood platform grew by 75%.

Especially in 2020, with the COVID-19 pandemic, the US government's stimulus policies, and the nationwide investment craze, both the number of platform users and trading volume surged, with managed assets once exceeding 135 billion USD.

The number of users has surged, and disputes have followed closely.

At the end of 2020, the Massachusetts securities regulator accused Robinhood of attracting inexperienced users through gamification while failing to provide necessary risk controls during market volatility. Soon after, the U.S. Securities and Exchange Commission (SEC) also launched an investigation into Robinhood, accusing it of failing to secure the best execution prices for its users.

Ultimately, Robinhood chose to pay $65 million to settle with the SEC. The SEC bluntly pointed out that even considering the commission-free incentives, users still lost a total of $34.1 million due to price disadvantages. Robinhood denied the allegations, but this turmoil is destined to be just the beginning.

What truly pulled Robinhood into the whirlpool of public opinion was the GameStop incident in early 2021.

This video game retailer, which carries the childhood memories of a generation of Americans, fell into distress under the impact of the pandemic and became a target for institutional investors to heavily short. However, thousands of retail investors were unwilling to watch GameStop be crushed by capital. They gathered on the Reddit forum WallStreetBets, collectively buying in using trading platforms like Robinhood, sparking a retail short squeeze battle.

GameStop's stock price skyrocketed from $19.95 on January 12 to $483 on January 28, an increase of over 2300%. A financial carnival of "grassroots resistance against Wall Street" has shaken the traditional financial system.

However, this seemingly victorious moment for retail investors quickly evolved into Robinhood's darkest hour.

The financial infrastructure that year was simply unable to withstand the sudden surge of trading frenzy. According to the settlement rules at the time, stock trades needed T+2 days to complete settlement, and brokers had to set aside risk margins in advance for users' trades. The skyrocketing trading volume caused the margin that Robinhood needed to pay to clearing institutions to rise sharply.

On the morning of January 28, Tenev was awakened by his wife and learned that Robinhood received a notification from the National Securities Clearing Corporation (NSCC) requiring it to pay up to $3.7 billion in risk collateral, putting Robinhood's cash flow on the brink.

He contacted venture capitalists overnight, raising funds everywhere to ensure that the platform was not dragged down by systemic risks. Meanwhile, Robinhood was forced to take extreme measures: restricting the purchase of popular stocks like GameStop and AMC, allowing users to only sell.

This decision immediately ignited public outrage.

Millions of retail investors believe that Robinhood has betrayed the promise of financial democratization, criticizing it for bowing to Wall Street interests. There are even conspiracy theories alleging that Robinhood colluded with Citadel Securities (its largest order flow partner) to manipulate the market in order to protect hedge fund interests.

Cyberbullying, death threats, and a barrage of negative reviews followed one after another. Robinhood suddenly transformed from a friend to retail investors into a target of criticism, forcing the Tenev family to seek refuge and hire private security.

On January 29, Robinhood announced that it had urgently raised $1 billion to maintain operations, followed by several rounds of financing, ultimately raising a total of $3.4 billion. Meanwhile, members of Congress, celebrities, and public opinion have been relentlessly pursuing it.

On February 18, Tenev was summoned to attend a hearing in the U.S. Congress, where he insisted in response to questioning from lawmakers that Robinhood's decision was due to settlement pressure and had nothing to do with market manipulation.

Nevertheless, the questioning has never subsided. The Financial Industry Regulatory Authority (FINRA) conducted a thorough investigation of Robinhood and ultimately issued the largest single fine in history — $70 million, which includes a $57 million penalty and $13 million in customer compensation.

The GameStop incident became a turning point in the history of Robinhood.

This financial storm has severely damaged Robinhood's image as the "retail investor protector," with its brand reputation and user trust taking a heavy hit. For a time, Robinhood became a "survivor in the cracks," being both unsatisfactory to retail investors and under scrutiny by regulators.

However, this incident has also prompted U.S. regulators to reform the clearing system, pushing to shorten the settlement cycle from T+2 to T+1, which will have a long-term impact on the entire financial industry.

After this crisis, Robinhood pushed forward with its long-prepared IPO.

On July 29, 2021, Robinhood went public on Nasdaq under the ticker HOOD, with an issue price set at $38, valuing the company at approximately $32 billion.

However, the IPO did not bring the expected capital feast for Robinhood. On the first day of trading, the stock price opened lower and eventually closed at $34.82, down 8% from the offering price. Although there was a brief rebound due to retail investor enthusiasm and institutional buying (such as ARK Invest), the overall trend remained under pressure for a long time.

The divergence between Wall Street and the market is evident - whether to view it as a financial gateway for the retail era or to worry about its controversial business model and future regulatory risks.

Robinhood stands at the crossroads of trust and doubt, officially entering the reality test of the capital market.

But at that time, few noticed a signal hidden between the lines of the prospectus - the word Crypto was mentioned 318 times in the S-1 filed by Robinhood.

The frequent occurrence, seemingly unintentional, is a declaration of a strategic shift behind it.

Crypto is precisely the new narrative quietly opened up by Robinhood.

Crash into Crypto

As early as 2018, Robinhood quietly ventured into the cryptocurrency business, becoming one of the first to launch trading services for Bitcoin and Ethereum. At that time, this move was more of a supplement to its product line and was far from becoming a core strategy.

But the enthusiasm of the market quickly changed everything.

In 2021, The New Yorker described Robinhood as a zero-commission platform that offers both stocks and cryptocurrency trading, committed to becoming a progressive version of Wall Street with the mission of "achieving financial democratization for all."

The growth of data also confirms the potential of this track:

In the fourth quarter of 2020, approximately 1.7 million users traded cryptocurrencies on the Robinhood platform, reaching 2