XRP Ledger has introduced automated market makers to revolutionize liquidity and trading in the DeFi ecosystem.
AMM replaced manual market-making with automated trading and liquidity provision.
AMM opened the door for innovative #DeFi applications built on XRPL.
XRP #Ledger (XRPL) has taken an important step towards creating a more robust and user-friendly DeFi ecosystem with the recent integration of Automated Market Makers (AMM). This new feature opens up a new paradigm for liquidity and trading on the network, offering exciting opportunities for both developers and users.
Previously, the decentralized exchange XRPL (DEX) relied solely on manual market making and a central limit #order book for liquidity. The new AMM integration acts as an embedded feature of XRPL DEX, facilitating automated trading and liquidity provision without the need for a traditional order book.
With this innovation, a liquidity pool of asset pairs is formed and prices are determined algorithmically based on the ratio of assets in the pool. This model is particularly beneficial for trading pairs with low trading volumes, providing constant liquidity and price stability.
In addition to the basic functionality, XRPL AMM has a number of unique features:
"Native" protocol: unlike other blockchains, XRPL AMM does not require developers to create separate #smart contracts, reducing associated risks and simplifying the development process.
Aggregated liquidity: the liquidity of all trading pairs is aggregated at the protocol level, preventing fragmentation between individual smart contracts.
Continuous auction mechanism: this mechanism allows arbitrageurs to bid at a discount to price divergence, facilitating immediate arbitrage and maintaining stable volatility.
One-way liquidity provisioning: users can contribute funds to the pool using only one asset, which simplifies the liquidity provisioning process.
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