Vet, a dUNL validator on the XRP Ledger (XRPL), recently demonstrated the successful deployment of XRP in an XRP/USD pool on the upcoming XRPL AMM.
In the demonstration, Vet leveraged Orchestra Finance, an AMM decentralized exchange (DEX) built atop the XRP Ledger to add 20 XRP (worth $12.23 at the time) and $12.25 worth of USDC to the XRP/USDC pool on the devnet version of the upcoming AMM.
A Live Demonstration of the AMM
Before deploying the tokens to the liquidity pool, the dUNL validator first connected his devnet Xaman wallet to the Orchestra Finance platform. For the uninitiated, the developer network (devnet) is a network environment tailored for software development and testing.
It allows developers to experiment and debug code in a controlled environment before deploying it to production. Devnets simulate real-world conditions to resemble production environments for more accurate testing. The XRPL AMM already exists on the devnet, allowing developers to test its performance.
The result of Vet’s demonstration suggests that the AMM feature is actually performing optimally as the broader XRPL community anticipates its arrival in the next four days.
Deployed 20 XRP and 12 USD in the XRP/USD Pool of the XRP Ledger Automated Market Maker in less than a minute on dev net 😇 pic.twitter.com/CfpaR26gTx
— Vet 🏴☠️ (@Vet_X0) March 17, 2024
Notably, after depositing the 20 XRP ($12.2) and the $12.2 worth of USDC to the XRP/USDC liquidity pool, Vet received 15,692 liquidity pool (LP) tokens after the network confirmed the transactions. Data showed that the XRP/USDC pool boasts 4.67 billion LP tokens worth $8.26 million.
For context, this represents the total worth of the tokens in the pool which provide liquidity for market participants seeking to swap XRP for USDC or USDC for XRP. The swaps would attract a trading fee of 0.481%, with the accumulated fees distributed to the liquidity providers, including Vet.
XRPL AMM Slated to Hit Mainnet on March 22
Following the demonstration, the validator reiterated the risks involved with being a liquidity provider on the upcoming AMM. One of the major risks is the susceptibility to impermanent loss. This phenomenon occurs when the value of an asset drops while a liquidity provider holds it in the pool.
Vet stressed that the XRPL boasts low fees despite being efficient, urging market participants to test the upcoming AMM with a small amount of XRP to reduce their risks. The validator noted plans to test out other platforms besides Orchestra, prompting a call for him to try out Anodos Finance.
Meanwhile, the broader community would be able to explore these options on the XRPL when the AMM gets implemented on the mainnet on March 22. Recall that the amendment regained validator consensus on March 15 shortly after a previous bug affecting its delivery was fixed.
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