Adding liquidity means depositing tokens into a pool so other people can trade against them. You become a liquidity provider, or LP. Trading fees stay in the pool and may increase the value of your share, but returns are not guaranteed and prices can move against you.
Read What is impermanent loss? first. It explains how you can end up with less than if you had just held your tokens, and that belongs in your decision before anything here does.
Before you start
You need an XRPL wallet with enough XRP for network fees and any required account reserve. You may also need a trustline for each issued token. Read What is a trustline? and What is impermanent loss? first.
Find a platform that clearly supports deposits and withdrawals for the exact pool you want. A site that lets you swap tokens does not necessarily let you add or remove liquidity. XPMarket and XMagnetic are examples of XRPL platforms to check, but available pool actions can vary; use their current instructions and proceed only if the platform explicitly shows the relevant liquidity controls.
What happens when you deposit
On the XRP Ledger a deposit is a transaction called AMMDeposit. You send one or both of the pool's tokens, and the ledger sends you the pool's LP tokens in return. LP tokens are your share of the pool.
To hold them, the deposit creates a trust line from your account to the pool's account. A trust line is the ledger's permission slip for holding a token (see What is a trustline?). Each one you own adds to the XRP your account must keep locked as a reserve. If you do not have enough spare XRP to cover that, the deposit fails.
Before signing, confirm both assets, the issuer of every issued token, the amounts, any fees and the LP tokens you expect to receive. The ledger or platform can reject a deposit if an asset cannot be held by your account.
Two ways to deposit
The ledger's deposit modes fall into two families.
Double-asset: both tokens
You put in both tokens, in the same proportion the pool already holds. For the XRP / DROP pool, that means some XRP and some $DROP, in the pool's current ratio.
The XRPL's balanced two-asset deposit mode does not charge the pool's trading fee, though your wallet still pays the network transaction fee. The pool's current ratio determines how much of each asset is accepted, so it may use less than the maximum amount you offered. Check the selected deposit mode and displayed amounts before approving.
Single-asset: one token
You put in only one of the two tokens, for example just XRP. This is convenient, but it costs more. The pool charges a fee, taken off the LP tokens you receive, based on how much your deposit shifts the balance of the pool.
A one-asset deposit can include a pool fee because part of the deposit is effectively exchanged for the other token before it joins the pool. Review the quoted LP tokens and both the pool and network fees before approving.
Both tokens
Balanced deposit mode has no pool trading fee; network fee still applies.
One token
Part is effectively swapped; pool fee may apply.
LP tokens
What you receive either way.
Slippage: why size matters
Because a single-asset deposit is treated partly like a swap, it behaves like one. The bigger your deposit compared with the pool, the more it shifts the pool's balance, and the bigger the fee. In a small pool, even a modest single-asset deposit can shift things a lot.
Some XRPL deposit transactions support limits on the price paid per LP token. Whether a platform exposes these controls depends on its current interface. If you cannot understand the limit or the amounts in the wallet request, do not sign.
Where to do it
Deposits are submitted through your wallet, often from a platform that prepares the transaction. If you need a wallet, see our Xaman and Joey guide.
Whatever you use, the transaction you sign is what counts. Read it before you approve it.
Check the pool before you sign. The pair should be the one you mean, for example XRP and DROP, and the $DROP in it must come from the issuer below. Any account can issue a token called DROP, and a pool for a copycat looks almost identical. A deposit into the wrong pool is a deposit into the wrong token.
ISSUER
rszenFJoDdiGjyezQc8pME9KWDQH43Tswh
CURRENCY
44524F5000000000000000000000000000000000
Once you are in
Your LP tokens sit in your wallet. You can work out what they are worth at any time: divide your LP tokens by the pool's total LP tokens to get your share, then apply that share to each of the pool's two balances. The ledger publishes all three figures.
Fees collected by the pool make each LP token worth more over time. Prices moving between the two tokens can make them worth less than holding. Past fee returns never predict future ones.
LP tokens also let you vote on the pool's trading fee, between 0% and 1%. A deposit can include a vote, or you can vote later with a separate AMMVote transaction.
Getting out: withdrawing
To leave, you hand back LP tokens with a transaction called AMMWithdraw. The same two families apply.
- Both tokens: you get each token in proportion to the pool's current balances. xrpl.org says these withdrawals are not charged a fee. You can hand back some LP tokens or all of them.
- One token: you get only one of the two, and a fee applies, calculated as if you had withdrawn both and then swapped the other one through the pool.
What you get back is a share of the pool as it is at that moment, not the tokens you put in. The proportions shift as people trade, which is the impermanent loss article in a sentence.