In a recent reply about Social Media X, Ripple CTO David Schwartz discusses the AMM liquidity pool associated with Ripple USD (RLUSD) Stablecoin. This was in response to X users who wanted clarification on the subject.
The pool has half RLUSD and half XRP. The assumption for the pool is that the LP token holder will be a long XRP and want to benefit from the volatility of the XRP.
– David ‘Joelkatz’ Schwartz (@Joelkatz) August 30, 2025
XRP Ledger’s Automatic Market Maker (AMM) uses liquidity pools instead of traditional order forms to drive transactions. The AMM feature was enabled in March 2024 with the revised XLS-30D.
A Clawback fix released in January this year allowed Ripple’s RLUSD Stablecoin to be directly surfaced and traded on XRP Ledger’s Dex, enhancing increased liquidity and trading options and distributed financial (DEFI) activity in the XRPL network.
RLUSD AMM Liquidity Pool explained
According to Schwartz, the AMM liquidity pool has mountains of RLUSD and XRP, each with roughly equal values. It also issues a token that represents a bill to the pool for the proportional share of the asset.
When XRP prices drop, the pool converts RLUSD to XRP to equalize the value. Meanwhile, when XRP prices rise, the pool converts XRP to RLUSD for value equalization.
The purpose is to always increase the value of the pool constant (divides the amount of XRP divided by the number of issued tokens).
According to Ripple CTO, the idea behind AMM’s liquidity pool is that the value of each liquidity token helps maximize the constant in the pool, regardless of whether the XRP price is round-trip or not.
The value of liquidity tokens in a pool can increase as individuals use the pool as a liquidity source to exchange XRP for RLUSD and pay for a spread. Ripple CTO said that while tokens gain value and reduce value with changes in XRP prices, they may not be more important than what they experienced by retaining only XRP.
In a further response, Ripple CTO explained that the liquidity pool has half the RLUSD and half the XRP, so the token holder is long in XRP and wants to benefit from its volatility.
