RLUSD Liquidity Pools: How They Safeguard XRP Holders and Generate Fees

Ripple's CTO David Schwartz explains that the RLUSD liquidity pool is designed to give investors exposure to XRP and are comfortable with its volatility. The pool holds RLUSD and XRP in equal value and investors who add liquidity get LP tokens representing their share of the pool. This arrangement allows liquidity providers to earn a profit and capture gains from market volatility. XRP continues to trade below $3, with a 0.68% increase in the last 24 hours and a 6.84% loss in the last seven days.

Ripple's CTO David Schwartz has outlined the mechanics of the RLUSD liquidity pool on the XRP Ledger, designed to provide investors with exposure to XRP while mitigating volatility. This innovative Automated Market Maker (AMM) pairs RLUSD and XRP in equal value, minting liquidity provider (LP) tokens that represent proportional shares of the pool [1].

The RLUSD liquidity pool balances RLUSD and XRP automatically, converting between assets as XRP prices fluctuate. This rebalancing aims to maximize the pool constant and generate earnings for liquidity providers through trading spreads. The introduction of XLS-30D in March 2024 enabled this AMM functionality on the XRP Ledger, simplifying liquidity provision and expanding on-chain DeFi primitives [1].

The RLUSD pool's value is determined by the formula (amount of RLUSD × amount of XRP) ÷ tokens outstanding, ensuring that the pool constant never decreases and grows through trading fees and spreads. This mechanism can potentially reduce the effective volatility of liquidity tokens compared to holding XRP alone, as the pool balances exposure across both assets [1].

Investors adding liquidity to the pool receive LP tokens proportional to their contribution. These tokens earn from the spreads generated by swaps, providing a profit-sharing mechanism. The pool's automatic rebalancing ensures that investors are not exposed to significant impermanent loss, a common risk in traditional liquidity pools.

As of July 2, 2025, XRP continues to trade below $3, with a 0.68% increase in the last 24 hours and a 6.84% loss in the last seven days. Despite these fluctuations, the RLUSD liquidity pool offers investors a unique way to gain exposure to XRP while potentially benefiting from market volatility through earned fees and spreads.

References:
[1] https://en.coinotag.com/ripple-cto-explains-how-xrp-rlusd-amm-liquidity-pools-on-xrpl-could-boost-liquidity-and-soften-xrp-volatility/