A simple guide to AMM on the
XRP ledger

⚠️FAQ, XRP COMMUNITY SENTIMENT & CURRENT AMENDMENT STATUS (Dec 7, 2023)

 

DEXES & WALLETS SUPPORTING THE AMM

 

GUIDE TO AUTOMATED MARKET MAKER (NOV 11, 2023)

 

What is the XLS-30 AMM Amendment?
The XLS-30 AMM Amendment is a proposed change to the XRPL that would introduce native automated market maker (AMM) functionality to the ledger. This would allow developers to easily create and deploy AMMs on the XRPL, without the need for custom code or infrastructure.

What are the benefits of the XLS-30 AMM Amendment?
The XLS-30 AMM Amendment would have several benefits for the XRPL ecosystem, including:

• Increased liquidity for XRP and other XRPL assets
• Improved price discovery for XRPL assets
• Reduced transaction fees for XRPL assets
• Increased flexibility for developers to create new AMM-based applications

 

What are the concerns about the XLS-30 AMM Amendment?
Some members of the XRP community have expressed concerns about the XLS-30 AMM Amendment, including:

• The potential for increased market volatility due to the introduction of AMMs
• The potential for AMMs to be exploited by attackers
• The potential for AMMs to centralize control over the XRPL

 

What is the status of the XLS-30 AMM Amendment?
The XLS-30 AMM Amendment is currently undergoing a voting process, where the XRPL validator community will decide whether or not to approve the amendment. If approved, the amendment will be integrated into the XRPL Mainnet.

When is the XLS-30 AMM Amendment expected to be implemented?
The timeline for the implementation of the XLS-30 AMM Amendment will depend on the outcome of the voting process. If approved, the amendment could be implemented as early as Q1 2024.

 

HOW DOES THE AMM WORK ON THE XRPL?
The AMM holds a pool of two assets and allows users to trade between them. The exchange rate adjusts based on the balance of assets in the pool, and a trading fee is charged on top of the exchange rate.

 

What are LP Tokens in the context of XRPL’s AMM?
LP Tokens are tokens that liquidity providers receive when they deposit assets into an AMM. These tokens represent a share of the assets in the AMM’s pool and can be redeemed for a proportional amount of the pool’s assets, including collected fees.

 

Can anyone create an AMM for an asset pair on the XRPL? 
Yes, anyone can create an AMM for an asset pair if it doesn’t exist yet, or deposit to an existing AMM. For any given pair of assets, there can be up to one AMM in the ledger.

 

WHAT NEW FEATURES DOES THE XLS-30D AMENDMENT BRING TO AMMS ON THE XRPL? 
The XLS-30D Amendment introduces new transaction types such as AMMDeposit and AMMWithdraw, the ability to vote on trading fees, and a continuous auction mechanism for improved arbitrage.

 

What is the significance of the XLS-30D Amendment for the XRPL
The XLS-30D Amendment is significant because it integrates AMM functionality as a core feature of the XRPL, enhancing liquidity and trading options within the decentralized exchange.

 

How does the XLS-30D Amendment address impermanent loss for liquidity providers? 
The amendment proposes a unique mechanism where the AMM instance auctions off trading advantages to arbitrageurs, charging them fees that are then distributed to liquidity providers. This helps to mitigate the effects of impermanent loss.

 

How does the AMM interact with XRPL’s limit order book (LOB) based DeX?
XRPL’s AMM based DeX interacts with the LOB based DeX so that users of AMM pools have access to all order flow and liquidity on the LOB DeX, and vice versa. The payment and order placement transactors automatically determine the best price for the user and execute accordingly.

 

DISCLAIMER
This guide is for informational purposes only.

 

SOURCES

https://github.com/XRPLF/XRPL-Standards/discussions/78

https://xrpl.org/automated-market-makers.html

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