The XRP Ledger is on the brink of welcoming its native automated market maker (AMM), with the potential to present passive income opportunities for the XRP community.
The XRP Ledger (XRPL) undergoes continuous development driven by constant community efforts. A highly awaited enhancement to the network is the upcoming XLS-30d amendment, set to introduce a built-in automated market maker (AMM).
An AMM is a decentralized exchange (DEX) where users can trade assets without a buyer-seller marketplace. In this setup, trading occurs against a liquidity pool – a collection of tokens provided by fellow users acting as liquidity providers.
A mathematical formula dictates the token prices within the pool. In addition, the AMM imposes a trade fee within the pool, distributing a share of this fee to liquidity providers.
The XRPL’s native AMM will provide significant advantages to the XRP community. These include enhancing XRP and other asset liquidity, offering diverse trading pairs, and enabling users to generate passive income.
Ways to Earn with the Upcoming AMM
Panos Mekras, an XRP community figure and financial consultant, called attention to the AMM in a recent post. He affirmed that introducing the AMM would allow the XRP community to earn on the XRPL for the first time.
If passed, $XRP holders will be able to earn, for the first time, income on-chain. #XLS30 #AMM https://t.co/nSiNHU2R1g
— Panos ? {X} ? (@panosmek) August 27, 2023
Through the forthcoming native AMM on the XRPL, XRP community members have the potential to generate income by participating as liquidity providers (LPs) or engaging in trading activities.
LPs contribute tokens to the AMM’s liquidity pools and, in exchange, receive LPTokens. These LPs can vote on the trading fee associated with each AMM instance. This influences their earnings and the appeal of the pool to traders.
These LPs can secure passive earnings by allocating tokens to pools with strong demand and limited supply and selecting an appropriate fee rate. However, they must consider the potential impact of impermanent loss.
Conversely, as traders, users can leverage the XRPL’s native AMM to access an extensive array of tokens and trading pairs that might not be accessible on alternate platforms. Additionally, they can take advantage of swift and cost-effective transactions facilitated by the XRPL.
These traders can earn passive income by leveraging arbitrage opportunities across various pools and platforms to exploit price disparities and realize profit opportunities.
Notably, the XLS-30d amendment is presently in the development phase and remains inactive as of the current time.
The amendment will come with the rippled version 1.12, scheduled for release on September 11. However, this inclusion will not activate the amendment, as it will be subject to voting by node validators.
Disclaimer: This content is informational and should not be considered financial advice. The views expressed in this article may include the author's personal opinions and do not reflect The Crypto Basic’s opinion. Readers are encouraged to do thorough research before making any investment decisions. The Crypto Basic is not responsible for any financial losses.
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