One more step towards the launch of the Robinhood Wallet feature
Robinhood customers may soon be able to deposit and withdraw cryptocurrencies. A report of Bloomberg suggests the popular stock broker test a new portfolio function. The financial news site has glimpsed new features in the beta version of the Robinhood app. It appears that users will initially have to sign up on a waiting list.
Robinhood crypto clients have been asking for a non-custodial option for some time – a wallet that they control. Currently, clients can only keep their crypto assets in a custodial wallet that resides on Robinhood’s servers.
The long-awaited wallet feature would further align Robinhood’s cryptocurrency offering with major cryptocurrency exchanges like Gemini and Coinbase, which already offer flexible wallet options.
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Robinhood’s crypto offering
Robinhood pioneered commission-free equity investing and was one of the first online brokers to open the door to cryptocurrencies. Its recent second quarter results showed that crypto trading now accounts for a significant portion of the company’s revenue.
Customers can buy seven cryptocurrencies, including Bitcoin (BTC), Ethereum (ETH), and Dogecoin (DOGE). Interestingly, Dogecoin accounted for 34% of crypto trading revenue in the first quarter of this year, and a whopping 62% in the second quarter.
However, the company is also finding out that cryptocurrency users want different functionality than stock traders. That’s why the CEO and co-founder of the company, Vlad Tenev, spoke in March of his intention to launch a crypto wallet “as quickly as possible”. There have been more promises since then, but this is the first concrete sign we’ve seen that the wallet may indeed appear.
Why crypto wallets matter
Simply put, non-custodial cryptocurrency wallets give users control over their assets. They come in many different forms, and crypto investors often own more than one wallet.
- Hot wallets are connected to the Internet and are often used for small amounts of money that people want easy access to. Some are purely web-based, while others work through mobile apps or need to be installed on your desktop.
- Cold wallets, or hardware wallets, are kept offline and are probably the safest way to store large amounts of cryptocurrency.
Every crypto you own has a public key and a private key. It’s kind of like an email address and password: you can share your email address or public key with other people, but only you need to know your private key or password. Crypto wallets store the keys to your crypto.
It should be borne in mind that there is no useful âforgot passwordâ function in cryptography. If you lose your private key, you won’t be able to get your crypto back, which is one of the reasons some investors prefer to leave their assets in a custodial wallet like Robinhood’s.
Do i need a wallet?
There are several reasons why crypto enthusiasts prefer to store funds in an external wallet – indeed, some argue that it is essential. The rallying cry âNot your keys, not your cryptoâ is rooted in the idea that if you don’t control your crypto keys, you don’t really own your crypto assets.
Here are some of the pro-wallet arguments:
- Crypto exchanges are often targeted by hackers. The first major cryptocurrency exchange hack was Mt. Gox in 2014, when around $ 450 million worth of crypto was stolen. Cryptocurrency exchanges have stepped up their security since then, and many have third-party crime insurance. Nevertheless, hacks do occur.
- Wallets can make it easier to spend and trade crypto. If your crypto is in a hot wallet like MetaMask, you can plug it in and pay for Decentralized Finance (DeFi) services or trade on a decentralized exchange.
- Crypto exchanges can experience outages or even be shut down by local authorities. This year, the popular Binance crypto exchange was banned in several countries, and in some cases investors were temporarily unable to withdraw their assets.
As your crypto wallet grows and you gain confidence with everything crypto related, a wallet will become more and more important. But first, investors need to be comfortable with the additional responsibility they are taking on.
Not only will you need to take steps to protect your password, but you will also need to make sure to safeguard your wallet and possibly boost your virus protection. There are also other considerations. For example, you will need to make sure your beneficiaries know how to access your coins in the event of death.
Almost 20% of existing Bitcoin is lost or inaccessible. A big contributing factor? Lost keys and lost wallets. A man in the UK threw a hard drive with 7,500 BTC (worth over $ 300 million). He spent years unsuccessfully lobbying local authorities for permission to search his local garbage site.
At the end of the line
It’s great that Robinhood can soon give clients the option to deposit and withdraw their crypto assets from the platform. Cryptocurrencies are not stocks, and it’s important to recognize that crypto investors have different needs.
However, if you’re just soaking your toe in the water, don’t feel like you have to dive in with a wallet right away.