XRP Ledger to Enter New Era with Major Amendment

The XRP Ledger (XRPL) is poised to enter a new chapter with the introduction of a major amendment that brings Automated Market Maker (AMM) functionality to its platform. 

This significant update, which has achieved an 85.7% consensus among its stakeholders, is scheduled to activate on the mainnet in 14 days. 

This move is hailed by many in the community as a progressive step towards realizing the vision of the Internet of Value, positioning XRPL at the forefront of decentralized trading and exchange.

Revolutionizing decentralized trading

The AMM functionality is a groundbreaking addition to the XRP Ledger, fundamentally altering how trading and exchange of value will be conducted. 

It allows the creation of liquidity pools for pairs of assets (tokens or XRP), where anyone can contribute liquidity and earn a proportional share in the earnings, as well as share the exchange risk.

Related

Wed, 01/31/2024 - 15:27

Vitalik Buterin Answers Major Bitcoin and Ethereum Question in Birthday Essay

Gamza Khanzadaev

This feature is integrated with XRPL's existing decentralized exchange, enhancing its capabilities. Each AMM on the ledger will have a special account to manage its assets and issue "LP Tokens" to liquidity providers based on their deposits. 

These tokens empower liquidity providers with the ability to vote on the AMM's trading fee. 

Moreover, users can bid on these tokens to gain the right to trade with a discounted fee for a limited period. 

Diverging views  

Ripple CTO David Schwartz previously argued that opposing the AMM amendment was tantamount to opposing the growth of XRPL. He believes that the amendment's benefits outweigh its costs.

On the other hand, concerns have been raised about the amendment's potential impact on the network's performance, with some community members likening it to "adding self-driving to a car that can't create a GPS route without crashing."

Schwartz further clarified that the AMM's primary impact is on CPU consumption, which is a less critical resource compared to ledger space, storage I/O, and network bandwidth. 

In response to questions about the long-term impact of AMMs, Schwartz predicted that while they will provide yield and liquidity on blockchains, they are unlikely to dominate over traditional market makers in centralized exchanges in the near future.