XRP Investors Warned by Ripple CTO: Don’t Use AMM!

• Ripple CTO David Schwartz has warned that investors should not keep their XRP tokens in an Automated Market Maker (AMM).
• He listed three reasons for this, including exposure to other digital assets, potential implementation bugs, and limited gain opportunities.
• Investors should thoroughly research the risks involved before deciding whether or not to hold XRP in an AMM.

Ripple CTO Warns On XRP AMM

Ripple’s Chief Technology Officer, David Schwartz, has outlined three reasons investors should not hold XRP in an Automated Market Maker (AMM). He made this clear in a tweet, responding to a question about what percentage of his XRP holdings he is willing to use in the AMM after its launch. Schwartz noted that he would commit between 1/3 and 1/4 of his XRP to the AMM. After providing the estimate, he shared three reasons XRP holders should not keep their tokens in the AMM.

What Is An Automated Market Maker?

Generally, an AMM is a decentralized exchange that implements specific mathematical algorithms to deduce the price of traded cryptocurrencies. With this tool, traders can seamlessly interact and trade their digital assets directly with a liquidity pool without a central authority.

Three Reasons Not To Use The AMM

The Ripple CTO mentioned exposure to other digital assets aside from XRP as one of the risks. He explained that AMMs are designed to provide liquidity for multiple assets, which means that if one asset in the pool experiences a significant price movement, it can affect the value of all the other assets in the pool, including XRP. This exposure to other assets can be particularly problematic for investors who hold XRP for the long term, as they may not want to be exposed to the price volatility of other assets.

Another risk associated with holding XRP on the AMM is an implementation bug. Schwartz explained that because AMMs are built on complex smart contracts, there is always a risk of bugs or vulnerabilities in the code. If a bug exists, it could result in the loss of funds for investors. Lastly, Schwartz sees lesser chances of making significant gains by holding XRP in the AMM, which he considers a risk.

Research Risks Before Deciding

Schwartz emphasized that while AMMs can be useful for trading tokens, they are not without risks. As such, investors should thoroughly research and understand