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Ripple Introduces AMMs To XRPL, But Is This Good Or Bad For XRP Price

Ripple Labs has announced plans to integrate Automated Market Makers (AMMs) into the XRP ledger. The decision has left the XRP community feeling uneasy, as they ponder the potential long-term effects of AMMs on the XRP price. 

AMMs To Be Integrated Into XRP Ledger

Ripple, a global payments network provider has stated its intentions to incorporate AMMs into the XRP Ledger to help improve liquidity. The introduction of AMMs into the XRP Ledger is expected to further develop the Ripple ecosystem by providing enhanced trading efficiency and liquidity. The initiative also aligns with Ripple’s efforts to continue to optimize and innovate its blockchain infrastructure and network. 

Although the announcement has been met with skepticism by the XRP community and the broader crypto space, Ripple has stated its desire to push forward its plans, looking at the bigger picture and potential success of AMMs in the ecosystem. 

Many crypto community members have expressed their concerns about the impacts of AMMs integrated into XRPL. Some members believe that the XRP price may be affected and cause the token to become stable. Other members have welcomed the announcement with enthusiasm, anticipating the positive effects the initiative would have on the Ripple ecosystem. 

An XRP community member and co-founder of Anodos Finance, Panos addressed concerns regarding the potential effect of AMMs on XRP’s price. He stated that AMMs could increase buying pressure and liquidity on XRP while also improving its efficiency and adoption. 

“XRPL AMM will potentially add buying pressure on XRP as a significant number is expected to be locked on the AMM, which will also increase the liquidity of XRP and will attract even more traders and will make XRP more efficient for more use cases,” Panos stated. 

XRP price chart from Tradingview.com (Ripple AMMs XRPL)

Community Probes Impact Of AMMs On XRP Price

Following the announcement of AMMs being introduced into the XRP Ledger, an X (formerly Twitter) influencer, Digital Perspectives PermaBull sparked a series of heated discussions in the XRP community regarding the effects of an AMM on XRP’s value.

The X influencer asked a series of controversial questions to the crypto community. One of the questions was if the introduction of AMMs and regulations established by the Bank for International Settlements (BIS) would end up transforming XRP into a stablecoin in the future. 

“Are we watching XRP become a Stablecoin with the introduction of AMMs and the Prudential Treatment requirements from the BIS?” the X influencer stated. 

He added, “XLS-30D passes and AMMs become an integral part of the XRPL, will it change the Characteristics of XRP and qualify as a Group 1b Asset for BIS and other Banks?”

In response to the growing concerns, XRPL advocate Panos reassured community members who had begun worrying about the potential impacts of AMMs on XRP. Panos affirmed that the fundamental characteristics of XRP would never change even with the inclusion of an AMM. 

“The characteristics of XRP can NEVER change. It will always remain the native coin of the XRP Ledger, a decentralized digital asset that anyone can trade freely. XRP can never become a stablecoin for that reason, it’s technically not possible and makes no sense whatsoever,” Panos stated.

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When Are AMMs Coming To XRP Ledger? Ripple CTO Gives Clear Answer

Following the announcement that the AMM functionality would be proposed as an amendment under the latest rippled version, many in the XRP community have continued to wonder how soon it could be implemented if passed. As a result, Ripple’s Chief Technology Officer (CTO) David Schwartz has provided some answers to the community to quench speculations.

How Soon The AMM Implementation Could Happen  

In response to a tweet asking how soon the AMM will go live on the ledger after voting, Schwartz stated that it should be enabled on the XRP Ledger (XRPL) “in about two weeks” if most validators vote yes to the proposal.  

The voting process kickstarted on September 7 following the announcement by Ripple’s developers. However, it seems that validators haven’t looked through the proposal yet or taken action. To the best of his knowledge, Schwartz mentioned that no validator has voted yes to the proposal yet, and 80% of validators need to vote yes for the amendment to be passed. 

He further gave his opinion on how the process should go, as he believes “validators shouldn’t vote yes individually.” Rather, the decision should lie with the community, with the validators voting in favor of the amendment if they “believe” the community supports it. 

Contrary to what many may think, the amendment process isn’t “supposed to be a governance mechanism,” according to Schwartz. Instead, the aim of the voting process is to “coordinate activation and prevent activation if a problem is discovered.” He emphasized that validators should be guided by the community’s decision, not what “they think is best.”

Schwartz’s Role In Ensuring Amendment Is Passed

In a subsequent tweet, the Ripple CTO mentioned that he was going to review the performance testing results in the next few days and run a “few code checks” using feedback that he had gotten from several people. If everything works out fine and no “new objections surface,” Schwartz mentioned that he will “start asking people to consider voting yes.”

Meanwhile, Ripple’s developers confirmed in a tweet that they have completed the extensive performance testing of the AMM feature. If adopted, this AMM functionality will bring “automated swap, trading, and liquidity provisioning capabilities to the ledger.” Community members also have a chance to earn passive income by acting as liquidity providers (LPs) to the ecosystem. 

Many in the XRP community seem to have welcomed the idea of a novel AMM feature on the XRPL, as it could help improve liquidity on the network and enhance faster and seamless trading. 

However, the same cannot be said about the ‘Clawback feature,’ another proposed amendment under the latest rippled version. Despite Schwartz defending the feature, many in the community argue that it undermines the essence of blockchain technology and decentralization.

Featured image from CoinCodex