Key Takeaways
- The XRP Ledger (XRPL) has integrated an Automated Market Maker (AMM) engine, creating liquidity pools and facilitating token swapping and liquidity sourcing.
- With the introduction of XLS-30 AMM, XRPL’s DeFi ecosystem can now provide users with new opportunities and benefits from decentralized applications, particularly decentralized exchanges (DEX).
- The AMM engine also facilitates the creation of bridges, allowing seamless interaction with other blockchain networks.
The XRP ecosystem, managed by its decentralized network XRP Ledger (XRPL), has seen progress following the integration of its automated market maker (AMM). With the new feature in place, the XRPL network opens its doors to new blockchain applications, expanding the use cases for the XRP token.
Ripple CTO Announces XLS-30 AMM With Few Warnings
In an X post, Ripple’s Chief Technology Officer David Schwartz announced the deployment of their XLS-30 AMM on the XRP Ledger mainnet.
Additionally, Schwartz cautioned traders using the AMM on the DEX since these pools do not yet have enough assets. He warned that depositing into an AMM with lower liquidity than your deposit could result in a loss. He also advised against single-sided deposits if there’s high slippage.
He recommended two ways to minimize risk: (1) depositing equal value of both assets or (2) using AMMs with liquidity for single-sided deposits. He adds that the risk of losses should decrease over time as AMM pools grow and attract more arbitrageurs.
What Is An Automated Market Maker (AMM)?
An automated market maker is a system that facilitates trading cryptocurrencies on decentralized exchanges. Unlike traditional exchanges that rely on order books from buyers and sellers, AMMs use liquidity pools and mathematical formulas to set prices.
XRP’s XLS-30 AMM is a recent upgrade for the XRP Ledger that will introduce DEXs into their DeFi ecosystem. It works by automatically matching buy and sell orders for XRP and other tokens using liquidity pools created by users. The new feature should increase liquidity, tighten spreads, and provide XRP holders with new ways to earn passive income when providing liquidity.
