Addressing Impermanent Loss Confusion
It appears that there has been confusion as to whether users of the XRPL AMM would have to provide XRP as liquidity. Noteworthy, these misconceptions come amidst some technical challenges that XRPL AMM has been experiencing.
Mekras explained to his followers that providing liquidity should be taken as a separate income strategy which would not require users to add the XRP tokens that they plan on holding.
“As a liquidity provider, you care about income and fees earned by the trading activity. It’s better if you don’t care if you end up with more on one side and less on the other. Total profit is what matters,” the Anodos Finance executive added.
On confusions about impermanent losses, He continued by saying these losses, a financial risk that could occur when an investor provides liquidity to a XRP Ledger AMM platform in a Decentralized Finance (DeFi) ecosystem, can either be good or bad. To put this in perspective, Mekras mentioned that there are certain scenarios where these impermanent losses are for the benefit of the user.
I still see some confusion and misconceptions on XRPL's AMM. Let's clarify: 1. You don't have to provide XRP. 2. Providing liquidity should be seen as a separate income strategy and not add assets you intend to hold. As a liquidity provider, you care about income and fees earned…
— Panos
License.
