What is the XRP Ledger AMM?

The XRP Ledger AMM is an automated market maker built into the ledger's own rules rather than added as a smart contract. It lets people pool two assets so others can trade against them, and it sits next to the order book exchange the XRP Ledger has had since launch.

How do XRPL AMM pools work?

A pool holds two assets. At most one of them can be XRP, and the other, or both, can be tokens issued on the ledger. The XRPL docs describe a formula that behaves like a constant product market maker. As one asset is bought out of the pool, its price rises, so larger pools give better rates because each trade moves the balance less.

Each asset pair can have only one AMM. Tokens with the same currency code from different issuers count as different assets. When someone places an offer or sends a cross-currency payment, the ledger picks the cheapest route, which may be the order book, the AMM or both.

What did the XRPL AMM amendment change?

The amendment, developed under the standard known as XLS-30, added six new transaction types and a new kind of ledger entry. An XRPL.org post said it was on track to activate on mainnet on March 22, 2024, provided a supermajority of validators kept supporting it.

Within days, a bug appeared. RippleX said that in rare cases involving complex payment paths, the payment engine withdrew the wrong amount of liquidity from a pool. Only the pool in the first report was affected, and a fix shipped in rippled 2.1.1 on March 26, 2024, with a follow-up amendment put to validators.

How do you provide liquidity on the XRP Ledger?

The first person to supply a pair creates the AMM and receives LP tokens representing all of it. Later depositors receive LP tokens in proportion to what they add, and withdrawing both assets returns their share. RippleX has said the design also allows single-sided deposits, where one asset is added and balanced into the pair. LP tokens are explained in what are LP tokens.

Providers vote on the trading fee, which can range from 0% to 1%. Only the eight largest votes by LP token holdings count. Fees go to the pool. Providers also face impermanent loss when prices move.

How is the XRPL AMM different from Uniswap?

Three differences stand out. First, the XRPL AMM is part of the protocol and shares liquidity with the order book, while Uniswap is a set of smart contracts on Ethereum and other chains.

Second, the XRPL pool spreads liquidity across all prices. Uniswap v3 lets providers concentrate liquidity in a chosen price range, so it earns fees only while the price stays inside it, as covered in concentrated liquidity.

Third, the XRPL has an auction slot. Providers bid LP tokens for a 24-hour slot that pays one tenth of the normal fee, and part of the winning bid is burned, raising the value of remaining LP tokens.