Panos Mekras, co-founder of Anodos Finance, recently utilized the X social media platform to debunk prevalent misunderstandings regarding the Automated Market Maker (AMM) feature of the XRP Ledger.

Mekras emphasized that providing liquidity should be regarded as a distinct income strategy, separate from merely holding XRP tokens. "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," he explained. Furthermore, Mekras highlighted the concept of impermanent loss, which, despite its potential risks due to price volatility, can actually yield benefits in certain circumstances.

Moreover, Mekras underscored the variability in risk among different liquidity pools. "Not all pools are created equal, and not all pools have the same risk," he remarked. For instance, investing in a stablecoin pool with pairs like USD/EUR entails minimal risk compared to pools comprising volatile cryptocurrency tokens with high correlation, such as XRP and XLM.

Additionally, Mekras clarified that XRP tokens do not support staking or earning. Instead, users can contribute their assets to the AMM, enabling others to engage in trading activities while receiving fees in return.