Anodos Finance co-founder Panos Mekras recently addressed common misconceptions regarding the Automated Market Maker (AMM) function of the XRP Ledger on the X social media network.
As mentioned by Merkas, users are not need to enter the XRP tokens they want to keep because liquidity should be viewed as a distinct revenue strategy. “You are concerned about the revenue and fees generated by trading activity as a liquidity provider. If you wind up with more on one side and less on the other, that’s preferable. What counts is the whole profit,” he continued.
In certain cases, customers may even gain from impermanent loss—a perilous situation that can be brought on by market volatility leading to a brief decline in value—according to the co-founder of Anodos Finance.
It’s important to note that various pools carry varying levels of danger. “Not all pools are created equal, and not all pools have the same risk,” Mekras stated. There is little risk involved in adding liquidity to a stablecoin pool using pairings like USD/EUR. On the other hand, pools that include of two highly correlated volatile cryptocurrency tokens (XRP and XLM, for example) might be quite hazardous.
Additionally, he mentioned that users may only send their assets to AMM, enabling others to trade them, as there is no staking or earning possible with XRP tokens. They can get paid for that in exchange.
The AMM function of XRP Ledger launched earlier last year. However, there have been technical difficulties with its introduction.
