Gaining Insights from a Ripple Labs Veteran: Uncovering the Imbalance in the USDC/XRP AMM Pool

Neil Hartner, a former Senior Software Engineer at Ripple Labs, has shed light on the ongoing imbalance in the USDC/XRP Automated Market Maker (AMM) pool.

In a recent disclosure, Hartner delved into the technical complexities behind this issue, addressing user concerns and explaining how AMMs work.

Understanding the Imbalance

Hartner emphasized the intriguing nature of the USDC/XRP AMM pool, attributing its imbalance to occasional delays in minting USDC. These delays result in a large portion of USDC being locked up in the pool, making it difficult for arbitrageurs to quickly rectify the imbalance.

Addressing user inquiries, Hartner clarified that the imbalance arises when users make unwise choices by depositing only one asset into an unbalanced pool.

Despite questions about the minor deviation from balance, Hartner clarified that even small discrepancies indicate an imbalance between the AMM rate and the exchange rate.

Hartner also addressed concerns about the feasibility of depositing into the AMM function with a single asset.

He explained that while it is possible through a DEX trade followed by a double-sided deposit, this process involves multiple transactions, which can be challenging for end-users. “The USDC/XRP AMM pool is interesting because it keeps getting out of balance,” said Hartner.

XRPL AMM’s

The developers of the XRP Ledger (XRPL) have made a significant change to their AMM engine with the “fixAMMOverflowOffer” amendment. This update addresses the issue of container overflow that was identified after the engine’s launch, ensuring smoother operation of AMM pools on decentralized exchanges (DEXes).

Neil Hartner’s insights into the imbalance in the USDC/XRP AMM pool provide valuable clarity on the technical challenges faced by liquidity providers and arbitrageurs. With the implementation of the “fixAMMOverflowOffer” amendment, the XRP Ledger continues to evolve, improving its functionality and resilience in the decentralized finance landscape.