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Ripple is advancing a new upgrade to its XRP Ledger that will introduce several significant features. The company’s CTO has repeatedly conveyed his enthusiasm for the upgrade and expressed his anticipation for its arrival.
This has also ignited a conversation regarding the potential effects of the implementation on XRP’s value. Let’s explore this further.
What’s The Fuss All About?
As reported by CryptoPotato, Ripple is set to implement an upgrade to its XRP Ledger that will incorporate two crucial features: an automated market maker and a clawback feature. The former is particularly noteworthy for this discussion.
The automated market maker (AMM) will be non-custodial and is expected to be integrated as a native feature to the DEX “in a manner that enhances returns for those providing liquidity for the AMM while minimizing the risk of losses due to volatility.”
According to the technical specifications of the upgrade:
XLS-30 will introduce a native Automated Market Maker to the XRPL that works in conjunction with the existing order book DEX to facilitate trading of digital assets in automated liquidity pools and allow developers to engage a broader audience of DeFi participants. – states the announcement.
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What About XRP’s Price?
One user inquired of David Schwartz – the CTO of Ripple – whether this could affect Ripple’s price.
When the AMM becomes operational, and numerous XRP holders begin contributing their XRP into pools, and since many of us only possess XRP… won’t the price of XRP decline since the AMM will be selling a large amount of XRP to balance the pools?
In response, Schwartz stated:
It’s accurate that if the AMM primarily draws from XRP holders, it will create a temporary net increase in selling pressure. I doubt that this will be substantial and it may even be counterbalanced by individuals moving in the opposite direction.
The CTO also mentioned that, theoretically, the AMM should help mitigate volatility by selling during price surges and purchasing during price drops, effectively converting volatility “into yield.”
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