XRP Ledger AMM Bug Fix Now Integrated: A Detailed Analysis

• XRPL-Standards

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  XLS: XRP(L) community defined Suggestions, Proposals, RFCs / Standards / Drafts & discussions, to be added to the core protocol, used for platform & apps devemopment, etc.

  

AMMs provide a new way to convert between assets that complements the DEX’s order books. Unlike offers, which have fixed exchange rates, the AMM exchange rate varies continuously as liquidity is consumed from the AMM pool according to a constant product formula (see XLS-30 for details). The payment engine needs a way to compare the discrete liquidity from an offer with the continuous liquidity from an AMM to provide the most cost-efficient path for payments.

• rippled

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  Decentralized cryptocurrency blockchain daemon implementing the XRP Ledger protocol in C++

  

The bug occurred when a multi-path payment interacted with an AMM synthetic offer, and the synthetic offer required to fulfill the payment exceeded the AMM pool size. In this case, the payment engine attempted to use the single-path strategy to back-out the maximum liquidity available to swap against the pool. Although this condition was properly detected, there was an error on how the payment engine resized the synthetic offer to consume liquidity only up to the AMM size. Instead of using the actual swap rate, which represents the cost of fully swapping one side of an AMM pool, the new synthetic offer’s exchange rate was incorrectly set to the spot exchange rate of the AMM (that is, the rate it takes to execute an infinitesimally sized order). Consequently, an AMM operation that should have been expensive became relatively cheap, effectively violating the constant-product invariant of the pool. In this state, another user could deposit funds into the drained side of the pool, generating a large number of LP tokens and taking ownership of the pool. Now that the fix amendment is active, the team has opened a PR with a unit test demonstrating this behavior.

• WorkOS

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