(Protocol) - Good morning, and welcome to Protocol Fintech. This Monday: Vlad Tenev’s curious fixation on dogecoin, BlueNorOff worries, and the Wolf of Wall Street’s new gig.
Off the chain
All this Elon Musk talk has gotten me nostalgic for the days when I knew him as an entrepreneur running a fledgling neobank called X.com. He’d gotten roughed around by the board of his first venture, which I’d covered, and maybe I felt a little sorry for him. I’d email him a leading question about his big-bank competitors, he’d send back something salty (but also suspicious — why was I asking?), and there was my next story. All these decades later, Musk is still moving money, but this time it’s denominated in the billions, and he’s doing the boardroom roughhousing.
— Owen Thomas (email | twitter)
Doggone strategy
Robinhood is in search of something that will restore its stock’s momentum. The same week the online brokerage listed shiba inu coin, CEO Vlad Tenev pondered the possibility that dogecoin could become “the future currency of the internet and the people.”
It’s an intriguing if slightly odd Twitter musing by the leader of a fintech powerhouse. But Robinhood is in Wall Street’s doghouse. Will this get it out?
Tenev sees promise in dogecoin. “I’ve been thinking about what that would take” to essentially make dogecoin the most important cryptocurrency in the world, he said.
- A key step is to reduce costs. Dogecoin is making serious progress in making its transaction fees “vanishingly small,” Tenev said. “We’re already there” as dogecoin fees slip to roughly $0.003, he said. Compare that to the 1% to 3% network fees charged by major card networks.
- Speeding up dogecoin transactions would also help, Tenev said. “Doge’s current block time is one minute,” which is “a bit on the long side for payments,” he said. Ten seconds “would be more appropriate,” he added.
- Elon Musk, perhaps dogecoin’s biggest cheerleader, took time off from his Twitter takeover campaign to weigh in, saying six seconds “is about right.” Dogecoin co-creator, Billy Markus, who goes by Twitter handle “Shibetoshi Nakamoto,” said “the infrastructure of the web has improved enough in 8 years to experiment with speeding it up.” (The other dogecoin co-creator, Jackson Palmer, hasn’t weighed in on Tenev’s enthusiasm, but he did find time to slam Musk’s hostile bid for Twitter.)
Are we seriously focusing on dogecoin right now? Tenev is raving about a cryptocurrency which began as a joke at a time when Robinhood is grappling with serious issues.
- Wall Street has increasingly taken a downbeat view of HOOD, which has shed 18% of its value this year. Goldman Sachs told clients it was time to sell, saying there was no clear path to “near-term profitability” and warning of “softening retail engagement levels (particularly among the low-end consumer).”
- Tenev’s interest in dogecoin is not surprising, Chris McCann, partner at Race Capital, said. Crypto now makes up a big chunk of Robinhood’s revenue, and dogecoin has been a major part of that. In August 2021, Robinhood said more than 60% of its crypto revenues came from dogecoin.
- There’s also trouble on the regulatory front. Robinhood scored a victory in Massachusetts where a superior court judge ruled against state securities regulators who argued that the company was turning stock investing into a dangerous game. But the company faces other serious hurdles, including a possible ban on payment for order flow, the controversial compensation scheme that’s its biggest moneymaker. Robinhood wants to bring payment for order flow into crypto, too.
- But Tenev’s excited about the prospect of using dogecoin for payments, citing its low costs. Lower fees mean less room for profit, though. How does any of this add up to a business opportunity for Robinhood?
Dogecoin as the “currency of the people” is a tough sell. McCann is “skeptical” that will ever happen. Christine Parlour, a finance and accounting professor at the UC Berkeley Haas School of Business, said credit cards remain popular and convenient. And there’s really no “strong economic motive for merchants to move away from credit cards to something like dogecoin,” she told Protocol.
By Benjamin Pimentel
