- Ripple CTO, David Schwartz, addressed concerns surrounding the debut of AMM.
- The Automated Market Maker (AMM) on the XRP Ledger (XRPL) is set to debut soon.
- Schwartz believes that the impact of the AMM on XRP’s volatility will be very small.
The upcoming launch of the Automated Market Maker (AMM) on the XRP Ledger (XRPL) has sparked discussion within the digital asset community. Ripple enthusiasts are curious about how this new feature might impact the native XRP token and, more specifically, whether it could contribute to a reduction in XRP’s price volatility.
Recent developments in the XRPL community delayed the implementation of the AMM, as validators raised concerns about a bug affecting its performance. However, the bug has been addressed, and the latest amendment boasts an impressive 74% validator consensus.
Ripple’s Chief Technology Officer, David Schwartz, recently engaged with the community on the potential impact of the AMM on XRP’s price stability.
He acknowledged that the introduction of the AMM could alter existing trading strategies but emphasized that it would also bring about new trading opportunities.
<blockquote>“There might be some trading strategies employed by humans today that make less sense with AMMs. But in exchange, new strategies such as arbitraging against the DEX and bidding in the continuous auction are created,” said Schwartz.<blockquote>
One intriguing strategy that Schwartz highlighted is volatility harvesting. This approach involves leveraging multiple AMM instances to capitalize on price movements and generate profits, theoretically leading to a reduction in asset price fluctuations. However, Schwartz expressed skepticism about the immediate and substantial impact of the AMM on XRP price volatility.According to Schwartz, the trading activity on the XRPL DEX is relatively minor compared to the overall XRP trading volume, which is dominated by centralized exchanges and other platforms. He described trading on the XRPL DEX as a “drop in the XRP trading ocean,” indicating that the influence of the AMM might not be as profound as some community members anticipate.
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