The Upcoming Introduction of AMM on the XRP Ledger: Opportunities for XRP Holders
Blockchain consultant Panos Mekras, Founder of DigitalGen Financial Services and Co-Founder of startup Anodos Finance, recently shared valuable insights on the potential opportunities awaiting XRP holders. These opportunities come with the introduction of a new Automated Market Maker (AMM) feature on the XRP Ledger (XRPL).
The XLS-30 Proposal and Its Innovative Profit-Sharing Approach
The XLS-30 proposal, revised by Dr. Aanchal Malhotra and David Schwartz, aims to integrate non-custodial Automated Market Makers (AMMs) into the XRPL’s decentralized exchange (DeX). This proposal introduces a unique profit-sharing approach that allows liquidity providers to capture a significant portion of profits typically earned by arbitrageurs. By auctioning trading benefits and imposing fees on arbitrageurs, liquidity providers receive a share of these fees.
Enhancing Liquidity and Governance Rights with AMM on the XRPL
The XLS-30 framework includes AMM instances that collect trading fees and funnel them into the capital pool, increasing returns for liquidity providers. Additionally, the largest shareholders within each AMM instance have governance rights, enabling them to determine the trading fees. This ensures a frictionless interface between AMM-based and limit order book (LOB)-based trading systems on the XRPL DeX.
The Anticipated Update and Benefits of On-Chain FX
The XLS-30 feature is expected to be included in the 1.12 version of “rippled,” the open-source software powering the XRPL, planned for September 11, 2023. Panos Mekras highlights the potential benefits of on-chain foreign exchange (FX) transactions facilitated by AMMs. These benefits include quicker and more cost-effective value transfers and the elimination of settlement risk, which currently stands at over $2.2 trillion.
Unlocking Opportunities for Businesses and Individuals
Mekras emphasizes the significant opportunities that lie ahead with the new XRPL AMM. Payment networks, financial institutions, businesses, and individual traders can engage in on-chain FX transactions and provide liquidity, earning fees from FX trading activities. Mekras advises XRP holders to focus on FX pairs like USD/EUR, where major players can generate substantial income with minimal risk and asset volatility.
On-Chain FX Benefits for SMEs and Tokenization of Real-World Assets
Mekras notes that on-chain FX offers significant cost savings and risk reductions for small and medium-sized enterprises (SMEs). Traditional FX hedging methods may be costly and inaccessible to SMEs, making on-chain FX facilitated by AMMs a valuable alternative. Additionally, Mekras sees a significant opportunity for tokenizing real-world assets like treasuries and precious metals on the XRPL AMM, expanding liquidity options.
Hot Take: On-Chain FX and AMMs Unlocking New Possibilities
The introduction of AMMs on the XRPL opens up new possibilities for XRP holders and the broader crypto community. Enhanced liquidity, efficient value transfers, and reduced settlement risk make on-chain FX transactions a game-changer in the financial landscape. As the XRPL AMM evolves, businesses, financial institutions, and individuals can seize the opportunity to participate in on-chain FX and earn fees from trading activities. This innovation particularly benefits SMEs, offering them cost savings and risk advantages. Tokenization of real-world assets further expands liquidity options and fosters financial inclusivity.
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