Robinhood launches its layer-2 test network.

Also: Citadel supports LayerZero blockchain, MegaETH mainnet launch, and ENS cancels L2 initiatives

Robinhood CEO Vlad Tenev (Sam Reynolds modified by CoinDesk)

Key Highlights:

Welcome to The Protocol, CoinDesk’s weekly summary of the most significant developments in cryptocurrency technology. I’m Margaux Nijkerk, a reporter at CoinDesk.

In this edition:

• Robinhood initiates trials of its own blockchain as it increases its focus on cryptocurrency and tokenization.
• Citadel Securities invests in LayerZero, which presents its ‘Zero’ blockchain for global financial markets.
• MegaETH launches its mainnet amid ongoing discussions regarding Ethereum’s scalability.
• Ethereum’s ENS identity framework abandons plans for a rollup after a cautionary note from Vitalik about layer-2 networks.

Network Developments

ROBINHOOD INTRODUCES BLOCKCHAIN: Robinhood launched the public testnet for its Ethereum layer-2 blockchain, with ambitions for a wider rollout later this year as the brokerage platform seeks to transition more trading activities on-chain. The new network, named Robinhood Chain, is built on Arbitrum and is intended to facilitate tokenized real-world assets, such as equities and exchange-traded funds (ETFs). Developers will be able to publicly create on the network for the first time after six months of private testing, leading up to a future mainnet launch, as announced by the company at CoinDesk’s Consensus Hong Kong conference. With this chain, Robinhood plans to enable users to trade continuously and self-custody their assets within Robinhood’s proprietary crypto wallet. Users will also have the capability to bridge across various chains and access decentralized finance (DeFi) applications on Ethereum, the firm stated. This initiative aligns with Ethereum’s core roadmap, which is refocusing on the base layer. Recent upgrades have already reduced transaction costs, and additional enhancements are anticipated to further alleviate congestion, a factor that diminishes the argument for layer 2s as a mere scaling solution. Robinhood’s strategy indicates an existing operational assumption in this context. “I think Vitalik [Buterin, Ethereum’s co-founder] has consistently communicated that L2s were not solely intended to scale Ethereum,” remarked Johann Kerbrat, Robinhood’s senior vice president and general manager of crypto, in an interview. “For us, it has never been merely about scaling Ethereum or achieving faster transactions.” — Margaux Nijkerk & Krisztian Sandor Read more.

CITADEL SUPPORTS LAYERZERO BLOCKCHAIN: LayerZero Labs introduced Zero, a blockchain designed to empower institutional-grade financial markets, along with a strategic investment from Citadel Securities in ZRO, the network’s native token and governance asset. ARK Invest is also investing in LayerZero’s equity and ZRO token, with CEO Cathie Wood joining a newly established advisory board alongside ICE executive Michael Blaugrund and former BNY Mellon digital assets head Caroline Butler, as stated by the company. The investment amounts were not disclosed. This announcement reflects a deeper commitment from traditional market infrastructure firms toward blockchain-based trading, clearing, and settlement, as scalability and performance challenges have long hindered real-world adoption. Tether Investments, the investment branch of the largest stablecoin issuer, has also made a strategic investment in LayerZero Labs, the company reported. Citadel Securities indicated it is collaborating with LayerZero to assess how Zero’s architecture may facilitate high-throughput workflows across trading and post-trade operations. Citadel’s investment in ZRO contributes to the rising institutional interest in LayerZero, which is recognized for running one of crypto’s largest interoperability networks. Zero is structured around LayerZero’s unique heterogeneous architecture, utilizing zero-knowledge proofs (ZKPs) to distinguish transaction execution from verification. The firm asserts that this design can scale to approximately 2 million transactions per second across multiple zones, with transaction costs nearing a millionth of a dollar and virtually unlimited blockspace. — Will Canny Read more.

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MEGAETH MAINNET LAUNCHES: MegaETH, a high-efficiency blockchain designed to make Ethereum applications perform almost instantaneously, has officially launched its public mainnet, entering a space currently engaged in a foundational debate regarding Ethereum’s scaling strategies. The initiative, which has positioned itself as a layer-2 “real-time blockchain” targeting over 100,000 transactions per second (tps), aims to make on-chain interactions feel more like those of traditional web applications compared to current crypto networks. Ethereum operates at less than 30 tps, according to Token Terminal. This launch concludes a swift ascent that has attracted both technical interest and substantial financial support. The project’s development division, MegaLabs, secured $20 million in a seed round in 2024 led by Dragonfly. Last October, it announced a $450 million token sale that was oversubscribed and backed by several prominent figures in the crypto space, including Ethereum co-founders Vitalik Buterin and Joe Lubin. This sale was among the largest fundraising efforts in the crypto sector that year. — Margaux Nijkerk Read more.

ENS CANCELS LAYER-2 INITIATIVES: ENS has opted not to proceed with Namechain, a proposed layer-2 rollup, marking another significant shift away from the previously prevailing notion that Ethereum’s future would predominantly rely on L2s. Instead of its own rollup, ENS will now implement the long-anticipated ENSv2 upgrade exclusively on the Ethereum mainnet, citing significantly reduced gas fees and a broader evolution in Ethereum’s scaling approach. According to ENS founder and lead developer Nick Johnson, the initial justification for launching a custom rollup no longer applies. “The environment has evolved since we first decided to pursue an L2,” Johnson mentioned in an interview with CoinDesk. Two years ago, elevated gas prices made rollups the “official trajectory,” but Ethereum’s base layer has since advanced to a level where transaction costs are manageable. — Margaux Nijkerk Read more.

Additional News

• Kraken has dismissed its chief financial officer, Stephanie Lemmerman, as the crypto exchange prepares for a public listing in the U.S. early this year, according to two sources familiar with the situation. Lemmerman, who joined Kraken from Dapper Labs in November 2024, served as the exchange’s CFO for one year and four months. She has transitioned to a strategic advisory role at Kraken, as noted by one of the sources. Robert Moore, the former VP of business expansion, has effectively taken over her responsibilities, as indicated by one source. An updated leadership page on Kraken’s parent company, Payward Inc., lists Moore as deputy CFO, while Lemmerman is not mentioned. The significance of Kraken’s decision to remove its CFO follows a confidential filing with U.S. regulators in November. This filing occurred just days after Kraken raised $800 million at a $20 billion valuation, which included $200 million from Citadel Securities. — Ian Allison Read more.
• Jump Trading is reportedly planning to acquire a minor stake in each of the prediction-market platforms Kalshi and Polymarket, according to Bloomberg, citing sources with knowledge of the matter. The trading firm, which has a substantial focus on cryptocurrency, will obtain these stakes in exchange for providing liquidity on the two platforms. Jump is expected to take a fixed amount of equity in Kalshi, while its share in Polymarket will increase over time based on the trading capacity that the firm contributes to the platform’s U.S. operations. Jump has recently expanded into prediction-market trading, adding 20 personnel for this segment, as per Bloomberg. — Jamie Crawley Read more.

Regulatory and Policy

• President Donald Trump’s proposed U.S. bitcoin reserve is not currently established, and no framework exists within the federal government for the large-scale acquisition of cryptocurrency. This context is important when reflecting on recent speculation regarding the price point that could prompt the White House to initiate purchases, largely fueled by CNBC’s Jim Cramer. There is no existing mechanism for such actions. The president did instruct the creation of a “strategic reserve” to hold bitcoin, but this has not yet materialized. The Treasury Department and crypto advisors spent months reviewing the federal government’s cryptocurrency holdings (although White House crypto advisor Patrick Witt stated to CoinDesk last week that they would not disclose a figure). However, the process encountered a hurdle: Advocates stated they require Congressional approval to establish the reserve legally. The new U.S. legislation for stablecoin issuers did not include this reserve, nor does the comprehensive crypto market structure bill currently moving through the U.S. Senate. Navigating legislation in this Congress—even less contentious issues—proves to be a considerable challenge, and industry lobbyists are concentrating on the bill aimed at finally creating market and oversight regulations for digital assets. Establishing a reserve may not even be a secondary priority, as crypto tax regulations also demand attention. — Jesse Hamilton Read more.
• Blockchain.com, a cryptocurrency exchange and wallet provider, has received regulatory approval in the U.K. nearly four years after appearing to withdraw its application. Blockchain.com has been added to the Financial Conduct Authority’s (FCA) registry of licensed crypto firms under its trading name “BC Operations.” The London-based company chose to retract its application for FCA licensing in March 2022, having not obtained approval before an impending deadline. Blockchain.com shifted to its registered business in Lithuania. This registration in the U.K. now permits Blockchain.com to conduct certain crypto-related activities in the U.K. as long as it adheres to money laundering and counter-terrorist financing regulations. — Jamie Crawley Read more.

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