XRPL AMM: These XRP Liquidity Pools Would Be ‘Fascinating to Watch’

As XRP Ledger might be getting closer to the activation of its native automated market makers, its enthusiasts are trying to predict the role and behavior of liquidity providers. Will they be interested in moving LP tokens out of the XRPL ecosystem?

XRP Ledger AMM: Will liquidity pools with XRP and LP tokens work?

Liquidity pools with XRP and LP rewards tokens are “inevitable” on XRPL-powered AMMs, and they will be “fascinating to watch.” A seasoned XRP community activist who goes by @WKahneman in X (formerly Twitter) shared his thoughts on the future of XRPL’s liquidity ecosystem.

Thinking re: XLS-30d AMM, should it pass. Liquidity Pool Tokens are defined as tokens on the ledger so they can also be put into liquidity pools, but since LP’s generate LPT, it becomes effectively inflationary. Will they make it to external exchanges?#XRP

— WrathofKahneman 🪝 (@WKahneman) October 10, 2023

He opined that Liquidity Pool Tokens (LPTs) will be “regular” tokens on the ledger so they can also be injected into liquidity pools. At the same time, since liquidity pool activity generates LPTs, their supply becomes effectively inflationary.

As such, LP operators might be interested in moving their rewards to “external” exchanges. At the same time, the arbitrage slots will require LPTs and burning their tokens.

As a result, we might see conflicts of interest between various groups of liquidity ecosystem participants in the XRP Ledger community:

So arbitrageurs will want LP tokens, burn them to pay for slot while people take profits from participating in pools by selling LP tokens. The inevitable LPT/XRP pool will be fascinating to watch.

As covered by U.Today previously, XRPL developers reported that the extensive testing of the AMM mechanism for the blockchain is finished.

XLS-30d AMM proposal gets too little support from community

However, it is yet to be seen whether the AMM proposal will be able to get backed by enough support inside the XRPL community.

This amendment that can be included in the rippled v1.12.0 software build has only scored one “yay” vote out of 28 required to pass.

Per the data shared by automated explorer XRPScan, Ripple remains the only active validator that supported the proposal.

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