‘It Should Be Impossible to Lose Value’

Ripple CTO David Schwartz has reassured the XRP community, declaring that with the implementation of the automated market maker (AMM) protocol in XRP Ledger, it should be virtually impossible to incur losses. The recent amendment, currently boasting 28 out of the required 35 votes, has triggered discussions within the community.

Responding to concerns about the risk of losing XRP, Schwartz outlined the AMM’s unique strategy. Liquidity providers receive tokens specific to the AMM, and the protocol aims to ensure these tokens’ value only increases over time, even in periods of volatility.

The cons

However, despite the inherent stability, the Ripple CTO acknowledged the potential downsides. While losses are theoretically minimized, users may not see as much profit as if they held the underlying assets during price surges. Furthermore, the AMM does not guarantee a fixed yield, exposing liquidity providers to market uncertainties.

Schwartz highlighted the advantages, emphasizing the ability to convert volatility into yield and mitigate losses during drops in asset values. However, he cautioned users about counterparty risk, as exposure to at least two assets, including stable ones like USD, could pose challenges.

In summary, these statements aim to assure XRP holders that the innovation is designed to protect against value losses. However, the potential risks associated with market dynamics and the possibility of unforeseen issues in the AMM implementation or the XRP Ledger are still there.

As the amendment vote progresses, the XRP community closely watches developments in the pursuit of a more robust and secure trading environment.