David Schwartz emphasized that the XRPL’s Automated Market Maker (AMM) is currently experiencing limited profits due to the high trading fees across different blockchains.
The XRPL’s AMM will soon be accessible to the XRP global community, allowing for seamless trading on an improved liquidity platform.
Ripple Labs-supported XRPL (XRP) network is set to adopt an Automated Market Maker (AMM) similar to Uniswap (UNI) for the Ethereum (ETH) ecosystem and Pancakeswap (CAKE) for the Binance ecosystem. The implementation of the XRPL’s AMM took place on Friday after receiving overwhelming consensus from validators.
However, the implementation of the XRPL’s AMM has faced various challenges, including technical and regulatory obstacles. Ripple is currently engaged in a legal battle to prevent XRP from being classified as a security.
Ripple’s CTO, David Schwartz, announced on Thursday that he has successfully implemented a trading bot that utilizes a similar algorithm as the XRPL’s AMM. Notably, the trading bot has been effective on centralized exchanges with different pairs, including Solana (SOL) and Ethereum (ETH), demonstrating the potential of the new AMM.
Nevertheless, Schwartz noted that the trading bot’s profitability is currently limited to approximately 11% per year due to the high transaction fees on certain blockchains. The Solana network, in particular, has experienced a significant number of unprocessed transactions caused by the frenzy surrounding meme coins, which has heavily impacted the network.
Schwartz tweeted, “It’s too early to say with high confidence, but it looks like it would make about 11% per year. But it’s really hampered by the trading fees it has to pay. You can see from the log that it can’t take advantage of smaller price movements and so misses a lot of volatility.”
With the XRPL’s AMM catering to all digital assets, developers can now create similar trading bots to benefit from the low transaction fees offered by different liquidity pools for XRP and other assets. Additionally, the increased cryptocurrency trading volume has heightened overall volatility, which presents opportunities for more profits.
Essentially, these crypto trading bots capitalize on numerous micro trades, minimizing the risk of holding onto a single trade and potentially missing out on other profitable setups.
The launch of the XRPL’s AMM is expected to have a significant impact on the price action of XRP. Traders, including bots, will have direct access to deep liquidity, which, combined with the anticipated settlement of the SEC vs. Ripple case, is likely to result in exponential growth for XRP in the coming months.
Since February, XRP has experienced a 20% increase in price, trading at approximately $0.629 on Friday, March 22, 2024. With a fully diluted valuation of around $62.9 billion, XRP is considered a large-cap altcoin.
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