Ripple CTO Explains How XRP-RLUSD AMM Liquidity Pools on XRPL Could Boost Liquidity and Soften XRP Volatility

  • AMM pools hold equal-value RLUSD and XRP and mint liquidity tokens.

  • Pools rebalance automatically when XRP price moves, converting between RLUSD and XRP.

  • Liquidity tokens rise from trading spreads; XLS-30D (March 2024) enabled AMM on XRPL and clawback enabled RLUSD trading (Jan 2025).

RLUSD AMM liquidity pool explained: Learn how XRPL AMM balances RLUSD and XRP automatically and how liquidity tokens earn via spreads — read more now.

What is the RLUSD AMM liquidity pool?

RLUSD AMM liquidity pool is an Automated Market Maker on the XRP Ledger that maintains a reserve of RLUSD and XRP of roughly equal value and issues tokens representing proportional shares of the pool. It automatically trades between assets to keep values balanced and capture spreads from swaps.

How does the XRP Ledger AMM work?

The XRP Ledger AMM replaces traditional order books with liquidity pools. Enabled via amendment XLS-30D in March 2024, the AMM holds asset pairs and uses an automated math function to rebalance holdings as market prices change.

When XRP price falls, the pool converts RLUSD to XRP to restore parity; when XRP price rises, it converts XRP to RLUSD. Traders pay a spread on swaps, which accrues to liquidity token holders.

How are liquidity tokens valued and what affects them?

Liquidity tokens represent a proportional claim on the pool’s assets and track a pool constant: (amount of RLUSD × amount of XRP) ÷ tokens outstanding. The protocol aims to never reduce the pool constant and to grow it through trading fees and spreads.

Token value fluctuates with XRP volatility. According to Ripple CTO David Schwartz, these tokens may show smaller effective volatility than holding XRP alone because the pool balances exposure across both assets.


Frequently Asked Questions

How did XLS-30D change trading on XRP Ledger?

Amendment XLS-30D introduced Automated Market Makers to XRPL in March 2024, enabling liquidity pools that facilitate on-ledger swaps without order books. This change simplified liquidity provision and expanded on-chain DeFi primitives on XRPL.

What role did the clawback amendment play?

The clawback amendment, activated in January this year, allowed the RLUSD stablecoin to be issued with on-ledger controls and be listed on XRPL’s DEX. This enabled direct RLUSD-XRP pool formation and improved trading options for stablecoin liquidity.

Is providing liquidity the same as holding XRP?

No. Providing liquidity exposes holders to both RLUSD and XRP and to impermanent loss dynamics; however, AMM mechanics and collected spreads can mitigate volatility compared to holding only XRP.

Key Takeaways

  • AMM introduction: XLS-30D (March 2024) enabled automated liquidity pools on XRPL.
  • RLUSD trading: Clawback amendment allowed RLUSD to trade on XRPL DEX, increasing DeFi activity.
  • Pool mechanics: Pools hold equal-value RLUSD and XRP, rebalance automatically, and issue liquidity tokens that earn from spreads.

Conclusion

The RLUSD AMM liquidity pool on the XRP Ledger pairs RLUSD and XRP in equal value, mints liquidity tokens, and uses automated rebalancing to maintain the pool constant. These mechanics, enabled by XLS-30D and the clawback amendment, expand on-ledger DeFi and offer liquidity providers a way to earn fees while sharing exposure to XRP volatility. For continued updates, follow COINOTAG coverage and official XRPL announcements.

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