Robinhood Chain is currently assessing a new transaction-ordering system that allows users to pay fees for prioritizing trades, according to an insider.
The technology, developed by Arbitrum, underpins Robinhood Chain's infrastructure. Previously, Arbitrum offered a paid transaction-ordering feature called "Timeboost," which provided users with a 200-millisecond advantage for processing orders. However, on September 24, Arbitrum transitioned to a new model known as Priority Gas Auctions, which enables traders to pay higher fees to ensure their transactions are processed before others.
The latest version of this technology is what Robinhood Chain is reportedly reviewing, as per a source who requested anonymity due to the sensitive nature of the discussions.
At present, Robinhood Chain employs a first-come, first-served approach to transaction ordering and has not utilized the original Timeboost system from Arbitrum.
Since its launch in July, Robinhood Chain has gained considerable traction, ranking among the top 10 blockchains by total value locked.
Robinhood's traditional brokerage operations, which are evolving into a continuous on-chain model for distributing tokenized stocks, have benefitted from a “payment for order flow” system, where brokers receive payments from market makers for directing customer trades to them.
In contrast, paid transaction priority on a blockchain enhances trading efficiency by allowing quicker processing times, which can be crucial for professional firms competing for fleeting trading opportunities. This approach also aims to mitigate the issue of frontrunning, or “maximum extracted value” (MEV), in transparent blockchain trades, potentially leveling the playing field for those aiming for faster trading connections. Such speed advantages have been a hallmark of high-frequency trading, famously highlighted in the book "Flash Boys."
Robinhood has chosen not to comment on the matter, while Off-Chain Labs, the team behind Arbitrum, did not immediately respond to requests for information.
Read more: Robinhood Leads Tokenized Equities in September as Volumes Hit $15.6B Record