Ripple CTO Shares Insights On Burning LP Tokens In XRP Ledger

According to U.Today, Ripple's Chief Technology Officer (CTO), David Schwartz, has shed light on the process of burning liquidity provider (LP) tokens in the XRP Ledger's automated market makers (AMM). AMMs are smart contracts that provide liquidity in the XRP Ledger's decentralized exchange. Liquidity providers (LPs), who deposit assets into an AMM, receive LP tokens from the AMM. Neil Hartner, a senior staff software engineer at Ripple, highlighted that AMM accounts on the XRP Ledger have the 'DepositAuth flag' enabled. This feature prevents anyone from sending XRP or token payments to these accounts, thereby avoiding accidental payments. It also implies that an AMM account cannot receive token airdrops from issuers. The 'DepositAuth flag' is an optional account setting in the XRP Ledger that, when enabled, prevents all transfers from unknown sources, including those of XRP and tokens. In response to Hartner's post, an X user speculated on how XRP burns occur in projects' attempts to 'burn' LP tokens. Schwartz joined the conversation, explaining the correct method to burn LP tokens. He stated, 'You can burn LP tokens by overpaying in the slot auction. You should do it this way because you want to ensure the pool valuation is correct.' Schwartz's suggestion was acknowledged, and Hartner agreed, noting that sending the tokens to a burner account would only burn a portion of the pool's assets.