What Is XRPL AMM?
How Automated Market Makers work natively on the XRP Ledger.
What Is an AMM?
An Automated Market Maker (AMM) is a type of decentralized exchange protocol that uses a mathematical formula to price assets. Instead of matching buyers and sellers through an order book, AMMs use liquidity pools — reserves of two assets — to facilitate trades automatically.
XRPL Native AMMs
The XRP Ledger introduced native AMM functionality through the XLS-30 amendment. Unlike AMMs on other blockchains that run as smart contracts, XRPL AMMs are built directly into the ledger protocol. This makes them faster, cheaper, and more efficient than contract-based AMMs.
Liquidity Pools and LP Tokens
Each XRPL AMM holds two assets in a pool. Liquidity providers deposit both assets and receive LP (Liquidity Provider) tokens representing their share of the pool. LP tokens can be redeemed for the underlying assets plus a share of trading fees. The pool automatically rebalances as trades occur.
Trading Fees
Each XRPL AMM has a trading fee set by its liquidity providers (ranging from 0% to 1%). When a trade occurs, the fee is distributed to LP token holders. The XRPL AMM also integrates with the native DEX, allowing the order book and AMM to compete for the best price on each trade.