The XRP community has received an update and enlightenment on the function of the Automated Market (AMM) liquidity pool . David Schwartz, Ripple’s Chief Technology Officer (CTO), in a post on X, explained the role of this in safeguarding XRP holders. How RLUSD Liquidity Pools Work for XRP Investors Notably, Schwartz maintains that the pool is not for people looking to avoid XRP risk. Rather, it is designed to give investors exposure to XRP and are comfortable with the volatility of owning the asset. For clarity, the liquidity pool holds Ripple USD (RLUSD) stablecoin and XRP in equal value. Investors who add liquidity get liquidity pool (LP) tokens as a representation of their share of the pool. Hence, the assumption is that anyone providing liquidity is interested in staying exposed to XRP, not eliminating risk. According to Schwartz, this means the holders “want to be long XRP.” This suggests that the holder is betting on the bullish performance of XRP in the crypto market. By providing liquidity, the investor will benefit if XRP climbs in value. However, when XRP’s price fluctuates randomly, traders can swap RLUSD for XRP in the pool. Each swap is designed to generate fees for LPs, with the more volatile XRP gaining in trading volume. This arrangement allows liquidity providers to earn a profit. Ripple CTO Addresses Questions on LP Rewards David Schwartz’s explanation drew reactions from the XRP community. A user asked about the possibility of diverting the collected fees into a different account in RLUSD, aggregating it, and subsequently distributing it to liquidity providers. The Ripple CTO clarified that the pool keeps the earnings invested for liquidity providers. However, it is possible to trade the LP tokens for dollars. Overall, by combining equal proportions of RLUSD and XRP, token holders are able to capture gains from market volatility. XRP’s Price Outlook In the broader crypto market, XRP continues to trade below the $3 level. The coin has not been able to find stability above this price target and has lost 6.84% in the last seven days. As of this writing, XRP is changing hands at $2.81, representing a 0.68% increase in the last 24 hours. Investors are still cautious as trading volume remains in the red zone by a significant 47.51% at $3.09 billion. The post RLUSD Liquidity Pools Shield XRP Holders, Ripple CTO Explains appeared first on TheCoinrise.com .
