Ripple Wants To Use Uniswap-Like AMM To Bring Massive DeFi Potential To XRPL

Ripple is debating including AMM functionality in its network. A Github announcement states that the 0030 XLS-30d proposal, which aims to bring Automated Market Maker (AMM) to the XRPL network, is still under consideration. The network is seen to stand to gain a great deal from this.

Cryptocurrency assets can now be traded without authorization or traditional order books thanks to automated market makers (AMMs). Using pools of accessible tokens referred to as liquidity pools, trading happens automatically.

Only manual market making and order books are being used to provide liquidity on the XRPL decentralized exchange (DeX). In order to maximize earnings for those who provide liquidity for the AMM and minimize the danger of losses brought on by volatility, the XLS-30d proposal intends to implement a noncustodial automated market maker (AMM) as a native feature to the XRPL DeX.

How Ripple aims to be unique?

AMMs vary, and different approaches have distinct trade-offs. Ripple views geometric mean market makers (GM3) as a native XRPL functionality as opposed to Uniswap. The GM3 algorithm calculates an arbitrage-stabilized fair exchange value to produce liquidity automatically.

This would offer liquidity pools on XRPL between any two issued assets as well as between XRP and the assets themselves. In great part because of arbitrageurs, the AMM DeX is kept in a constant state in reference to foreign markets.

AMMs have their own arbitrage risk and issues, but according to Ripple CTO Joel Katz, the XRPL AMM would feature a “special sauce” that would incentivize arbitrageurs to burn liquidity tokens more frequently and quickly in order to increase the benefits to liquidity providers.

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