The Stellar Lumens community are all excited about Automated Markets Maker on Stellar as it is expected to really increase liquidity on the Network.

Why is liquidity important in a network? Liquidity is very important for any process to keep sustained. Every asset starts with zero liquidity.  It is only when people are willing to put their capital in to the network it will be possible for the asset to be used in conversion, because conversion is only possible when value accrues. When there is enough liquidity the network will thrive and it will be able to provide for liquidity which is accessible, simple and inclusive.

When networks continue to grow, there will be an increased need for liquidity.  There is a need to create constant product liquidity protocols.  The liquidity pools will be created between any two assets.  The process will be as simple as a Uniswap formula.  New operations will be created so that users can deposit and withdraw from liquidity pools.

When the AMM will be implemented, it will make it possible to store pool shares that can in turn be exchanged for a portion of liquidity pool reserves in terms of depositor trust lines.  There will be a fixed fee at 0.3% and it will be possible to change path payments so that they execute versus liquidity pools when they provide better exchange rate than DEX.

Community response:  Are people incentivized to provide liquidity with XLM?  XLM has a lot of use cases. With AMMs the number of users will increase significantly. This will increase the value of XLM too. No clue about incentives.  Why is stellar only $0.26 with all it’s real world collaborations?

Optimists believe that DeFi on Stellar will grow.  They are looking forward to see lending and borrowing apps, derivatives, yield farming, etc. on Stellar Network. The community believes they are already the best network for payments and that now it’s time to be the best for DeFi

Community Concern:  So do liquidity pools = Same as staking? What happens if all tokens get purchased in pool and staker wants tokens back who covers that? In bear market does more tokens staked = lower price? Who’s carrying/ covering the risk of fat fingers and large market movements?

Stellar is moving at a glacial pace. Solana is eating your lunch. By the time you get in the game Cardano, Avalanche, Polkadot will be light years ahead.

Was there really a liquidity problem in the first place? Or is this just a way to manipulate markets even more.