The XRP Ledger (XRPL) community recently experienced a development with its Automated Market Maker (AMM) functionality. This update aims to clarify the situation and future steps.
On March 22, 2024, a long-anticipated amendment introducing AMMs to the XRPL went live. AMMs are a common decentralized finance (DeFi) tool that facilitates decentralized token trading.
Unfortunately, a community member promptly identified a discrepancy in specific AMM pool behavior. This indicated that transactions were not processed as intended.
A collaborative effort emerged to address the issue. RippleX, the development arm of Ripple, joined forces with Orchestra Finance, tequ, and other XRP Ledger validators. Through this collaboration, the root cause was identified as a flaw in how the DEX payment engine interacted with AMM pools and order books during specific, complex payment scenarios.
The identified issue impacted how liquidity flowed through AMM pools and order books within the DEX payment engine. This resulted in unexpected outcomes for certain transaction paths. To rectify this, a solution has been developed and is currently undergoing rigorous testing and review. Once finalized, it will be implemented through an amendment to the XRP Ledger protocol.
The proposed AMM amendment fix necessitates a vote by XRP Ledger validators. The amendment requires over 80% consensus among validators over a standard two-week voting period.
In the interim, to ensure user safety, it is strongly advised that users refrain from depositing new funds into AMM pools. Existing users with Liquidity Provider (LP) tokens are encouraged to redeem them until the fix is implemented.
Before the AMM amendment, the XRP Ledger primarily relied on a Central Limit Order Book Decentralized Exchange (CLOB DEX) for facilitating token swaps. However, AMMs have become a popular tool within the DeFi space, offering an alternative approach to decentralized trading. The AMM amendment on XRP Ledger integrates this functionality alongside the existing CLOB DEX, giving users more flexibility.
The XRP Ledger community eagerly awaits further details from RippleX regarding the AMM amendment and the upcoming resolution. Ripple’s commitment to transparency and collaboration is evident in its prompt response and partnership with community members to address the identified issue. This collaborative approach ensures the continued development and stability of the XRP Ledger ecosystem.
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