A recent investigation by blockchain sleuth Mr. Huber has shed light on Ripple’s strong support for implementing an Automated Market Maker (AMM) on the XRP Ledger (XRPL). The discovery, stemming from a document in the ongoing Ripple vs. Zakinov case, reveals that Ripple’s On-Demand Liquidity (ODL) service, which utilizes XRP for cross-border payments, faces high liquidity costs.
This document, marked as “highly confidential” in 2021, indicates that Ripple incurs significant expenses in paying fees to market makers who supply liquidity for ODL transactions, particularly in markets with low XRP liquidity.
Mr. Huber’s analysis suggests that the AMM feature, currently under voting, could be a strategic move by Ripple to mitigate these costs. The AMM would allow anyone to provide liquidity, increasing the availability and reducing the cost of liquidity for trading pairs on the XRPL. This is seen as a beneficial move for both Ripple and XRPL users. However, the voting process for this feature has been delayed due to a lack of consensus among XRPL validators.
Challenges and community reactions
Despite Ripple’s push for the AMM feature, not all community members are convinced of its effectiveness in improving the ODL service. Panos Mekras, a noted crypto author and proponent of XRP, has highlighted that while the AMM could be beneficial, it is not a complete solution. Mekras points out the necessity of on/off-ramp protocols, which are unavailable or costly in some regions. He argues that the true potential of combining ODL with AMM can only be realized when these protocols are widely available and accessible across all ODL corridors.
Furthermore, the AMM’s implementation has been met with delays, raising questions from the community. As of the latest updates, 17 validators have voted in favor of the AMM, while 18 remain opposed. WrathofKahneman, a prominent figure in the XRP community, has explained that some validators are hesitant due to concerns about the potential strain the AMM could place on the network. These validators are awaiting more comprehensive testing before fully endorsing the feature.
The road ahead for Ripple and XRPL
The revelation of Ripple’s motives behind advocating for the AMM underscores the complexities of managing liquidity in the blockchain and cryptocurrency. If successful, Ripple’s strategic move could reduce the costs associated with its ODL service and enhance the overall liquidity and functionality of the XRPL. This development holds significant implications for the future of Ripple’s services and the broader XRP community.
Nevertheless, the outcome remains uncertain, hinging on the eventual approval and successful implementation of the AMM feature. The ongoing discussions and debates within the XRPL community reflect the dynamic and evolving nature of blockchain technology and its applications. As Ripple continues to navigate the challenges posed by the Ripple vs. Zakinov lawsuit, the company’s strategic decisions and their impacts on the XRPL ecosystem will be closely watched by investors, users, and regulators.