Ripple’s CTO David Schwartz Warns Crypto Users of Potential Losses in AMM Deposits

The cryptocurrency world is abuzz with Ripple’s XRP as it introduces the Automated Market Maker (AMM) feature on its ledger, marking a pivotal moment for the platform. 

Amidst this development, David Schwartz, Chief Technical Officer (CTO) at Ripple, took to X platform to caution cryptocurrency users about potential losses when making deposits into Automated Market Makers (AMMs).

The Warning!!!

In a recent tweet post, Schwartz highlighted the risks associated with single-sided deposits in AMMs that do not have funds larger than the actual size of the investment.

He further said such holdings can lead to losses in cash stored in the system, usually indicated by a “slippage”, provided by the storage tool.

Additionally, Schwartz emphasized the possibility of losses when investing in highly involved pre-investment AMMs. But he noted that such incidents should not be rare, since they represent missed opportunities for all involved. 

In such cases, users can get a return on their investment by unilaterally placing an asset that does not have a pool.

Also Read: Ripple vs. SEC: Sealed Brief Set for Public Release, Timelines Revealed

Safest Approach

Ripple CTO Schwartz recommended considering the safest option and advises users to use alternative storage methods if they experience significant falls and recommends AMM be traded and equal amounts be invested in both assets.

However, he also noted that in general, single-sided deposits in a reasonably liquid AMM should be safe. As AMM pools grow and more continue to trade, Schwartz believes the risks will decrease. He also expects pools to be more likely to balance out, with higher liquidity over time.

Meanwhile, Schwartz’s warnings serve as a reminder to cryptocurrency users to carefully consider AMM fees and balances before investing.

Also Check Out The: Ripple CEO Slams SEC, Warns Ethereum Battle Threatens USA Crypto Dominance

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