The XRP Ledger (XRPL) could soon receive an upgrade, the much-anticipated XLS-30d amendment, which would introduce an integrated automated market maker (AMM) trading platform into the Ledger, which would allow holders of $XRP tokens to generate revenue. Chain.
An AMM is a platform that enables permissionless cryptocurrency trading using liquidity pools instead of traditional order books. Liquidity pools are joint pools of two or more user-supplied tokens used for trades. The prices of the tokens within the pool are determined using blockchain oracles.
One of the key benefits of AMMs is that they eliminate the need for middlemen and order books, reducing transaction costs and delays. AMMs also allow for high liquidity and low slippage as users can always trade the pool regardless of market conditions.
Investors who add tokens to liquidity pools receive a share of the fees charged on each trade, but the earnings come with a risk of temporary loss. A temporary loss occurs when price fluctuations change the ratio of tokens within the pool, meaning token providers might be better off simply keeping the tokens in their wallets.
The loss is considered temporary as the token ratio can be restored. In this case, the token provider would win the fees earned over time. An AMM on the XRP ledger would mean that XRP token holders could earn fees from trades on the AMM.
An AMM on the XRP ledger would also allow chain users to seamlessly convert to other assets on chain while also significantly increasing the liquidity of XRP itself as liquidity providers generate income through liquidity pools.
Notably, the change is not yet available on the XRP ledger, but is expected to roll out on September 11th. After the change went into effect, examiners would still need to vote on the use of an AMM.
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