{"id":571808,"date":"2024-01-26T21:30:11","date_gmt":"2024-01-26T21:30:11","guid":{"rendered":"https:\/\/www.wncen.com\/?p=571808"},"modified":"2024-06-11T07:52:48","modified_gmt":"2024-06-11T07:52:48","slug":"ripple-cto-amm-xrp-income","status":"publish","type":"post","link":"https:\/\/www.wncen.com\/news\/ripple-cto-amm-xrp-income\/","title":{"rendered":"Ripple CTO Explains How AMM Feature Will Enable XRP Holders To Earn Passive Income"},"content":{"rendered":"
The decentralized open-source blockchain, <\/span>XRP Ledger<\/span><\/a>, is set to introduce more innovative solutions to XRP holders through its new <\/span>Automated Market Maker (AMM)<\/span><\/a> feature. The XRP community is currently buzzing with excitement as the Chief Technology Officer (CTO) of Ripple, <\/span>David Schwartz,<\/span><\/a> unveils how the AMM offers a unique avenue for earning passive income.<\/span><\/p>\n In a recent X (formerly Twitter) post, Schwartz <\/span>discussed<\/span><\/a> the ways an XRPL AMM could provide opportunities for <\/span>XRP holders<\/span><\/a> to make regular income through the AMM\u2019s distinct trading mechanism.\u00a0<\/span><\/p>\n When asked by an XRP enthusiast about the potential risks of losing XRP investments if they participated in the <\/span>AMM<\/span><\/a>, Schwartz responded by stating that \u201cit is not supposed to be possible to lose.\u201d He clarified that the occurrence of losses would mean there was a flaw or unexpected bug in the implementation of the AMM.\u00a0<\/span><\/p>\n The Ripple CTO provided details of how investors can make passive income through the AMM’s liquidity pools. He stated that when a user provides liquidity to an AMM by making a deposit to its pools, they will receive \u201cliquidity tokens\u201d specific to the AMM liquidity pool they deposited to.\u00a0<\/span><\/p>\n Illustrating the strategy and mechanics behind the <\/span>XRPL AMM<\/span><\/a>, Schwartz revealed that the AMM works by permitting an increase in the value of a user\u2019s liquidity token. He explained that this unique strategy was employed because it effectively converts volatility into a higher value for a token over a period of time.\u00a0<\/span><\/p>\n While the prospect of generating passive income through the AMM exists, Schwartz emphasized that an AMM does not prevent or safeguard against a decline in the actual value of your position.\u00a0<\/span><\/p>\n Expatiating his words with an example, Schwartz pointed out that if a user exchanged 1 <\/span>XRP<\/span> for $1 and after applying the AMM strategy the user received 1.05 XRP worth $1.05, then the strategy successfully increased the value of the XRP. However, if the <\/span>price of XRP<\/span><\/a> in dollars decreases, the overall value of your position may be lower.\u00a0<\/span><\/p>\n <\/p>\n In a recent X post, co-founder of Anodos Finance, Panos Mekras, <\/span>provided<\/span><\/a> a comprehensive definition of an AMM and its impact on the <\/span>XRPL ecosystem<\/span><\/a>. Using an analogy, Mekras described an AMM as a self-operating store where the price of items is not fixed by a single entity but determined by the availability of the item.\u00a0<\/span><\/p>\n Mekras revealed that when there is high demand for an item, active trades increase, and the AMM adjusts the price of items to reflect an inflated value. Conversely, if there is low demand, the AMM lowers the price of items to encourage trade. In essence, the AMM works by balancing the supply and demand system of an item.\u00a0<\/span><\/p>\nXRPL AMM To Empower XRP Holders<\/h2>\n
Token price reaches $0.51 | Source: XRPUSD on Tradingview.com<\/a><\/pre>\n
Advantages And Disadvantages Of An AMM<\/h2>\n