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Robinhood debuts no transaction fee crypto wallet

Robinhood (HOOD) is rolling out its newest crypto wallet that covers blockchain transaction fees to 10,000 customers.

The "beta program" gives select users a first crack at trying the not yet released “self-custody” crypto app that also allows customers to hold full custody over their funds.

This second wallet follows the release of its first one in April and underscores the company's continued commitment to the crypto space.

“From what we’ve seen, a lot of crypto apps are very complicated. They are made by engineers for engineers," Robinhood Crypto CTO and GM Johann Kerbrat told Yahoo Finance. “Like we did with the stock market, Robinhood Wallet is striping away some of those complexities to make crypto more accessible."

Trading slightly up (+0.29%) at $9.50 during Tuesday's premarket session, shares of Robinhood have fallen more than 79% since the company's IPO in late July 2021.

Robinhood wallet
Robinhood wallet

In this initial beta rollout, the product will only support transactions using the Polygon blockchain and, for the time being, viewing and trading NFTs will not be supported.

Dubbed “Robinhood Wallet,” the app is aimed at letting HOOD customers explore the efficient and wild corners of crypto’s decentralized finance (DeFi) markets. Users will also be able to earn "crypto rewards" for using the app, according to the company.

A critical strength in using a self-custody crypto wallet is that held funds aren’t vulnerable to hacks or other system failures on the platform. Instead, a non-custodial wallet puts the onus on individual users to safeguard and store their own private key passwords.

Since bitcoin’s earliest days, there have been stories of crypto investors losing their private keys and thereby missing out on untold fortunes (see “Bitcoin Dumpster Guy”).

Yet given bankruptcies of firms like Voyager Digital and Celsius Network, the risks of holding funds with centralized crypto platforms has moved to the forefront of investor concern in recent months.

"If tomorrow Robinhood disappeared, the customer would still own their keys and their assets," said Kerbrat, adding that customers will always be able to export their key to another wallet even in the case of bankruptcy.

Robinhood customers avoid paying blockchain network fees with the new wallet thanks to a background marketplace where crypto market makers and other liquidity providers compete for customer bids, thereby covering network fees, according to Kerbrat.

The process is not unlike Robinhood's payment-for-order-flow (PFOF) practice. The key exception is that the trading platform doesn't earn a rebate from market makers filling customer orders.

According to Devin Ryan, an analyst with JMP Securities, PFOF made up 9% of Robinhood’s equities revenue last quarter and 18% of crypto revenue on its platform.

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David Hollerith is a senior reporter at Yahoo Finance covering the cryptocurrency and stock markets. Follow him on Twitter at @DsHollers

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