Despite its ongoing legal battle with the US Securities and Exchange Commission (SEC), Ripple and its community have continued to build and advance the XRP Ledger. As part of its efforts, the rippled version 1.12 is set to be released, with XRP holders having the opportunity to make passive income from this update.
An AMM Under Ripple’s Latest Version
As noted by pro-XRP financial consultant Panos Mekras, the AMM proposal, if passed, will allow XRP holders “to earn, for the first time, income on-chain.”
An AMM is a decentralized exchange (DEX) where traders can buy and sell crypto assets. However, unlike what is attainable in a centralized exchange (CEX), users do not trade with other people but directly through the liquidity pool.
The liquidity pool is one of the ways XRP holders are expected to make passive income from this venture, as they can act as liquidity providers and provide their tokens to the liquidity pools while they earn trading fees in return based on the level of liquidity provided. These holders and traders can also make income from arbitrage opportunities.
It is worth mentioning that Ripple proposed the novel AMM design in June 2022 to complement its XRPL DEX and provide greater functionality and utility to users. The AMM Devnet then went live in November 2022, with developers able to test it and build applications.
Despite the release date for the rippled version 1.12 being set for September 11, node validators still need to vote and approve the AMM amendment before it can be implemented on the blockchain.
Token price still holding $0.5 support | Source: XRPUSD on Tradingview.com
XRPL Set To Be A Major DeFi Player?
Introducing a novel AMM functionality can help expand XRPL’s use case and establish it as a major player in the Decentralized Finance (DeFi) landscape.
The AMM reportedly boasts exciting features that could attract major DeFi projects to the network. One of them is that the AMM functionality is rooted in the blockchain, meaning liquidity can easily flow to all projects built in the ecosystem.
Developers can easily integrate the AMM functionality into their platforms, eliminating pain points like liquidity bootstrapping. Liquidity bootstrapping refers to when a new project has to derive liquidity from already established projects in the network.
Meanwhile, this development has immense benefits for the XRP token as the influx of more projects into the ecosystem can increase the demand for Ripple’s native token.
Furthermore, there could be a significant spike in daily transactions conducted on the XRP Ledger once the proposal is approved. This comes as the Ripple blockchain has already seen a surge in trading activity since Judge Analisa Torres’ ruling in favor of Ripple Labs.
Featured image from iStock, chart from Tradingview.com