AMMClawback Amendment Sparks Decentralization Debate on the XRP Ledger

The activation of the AMMClawback amendment on the XRP Ledger (XRPL) has sparked debates surrounding the network's decentralization.

The recent activation of the AMMClawback amendment on the XRP Ledger (XRPL) has sparked a lively debate within the XRP community regarding the network's decentralization. On January 30, 2025, the amendment was integrated into the XRPL, paving the way for tokens with clawback capabilities, such as Ripple's RLUSD stablecoin, to be traded within Automated Market Maker (AMM) pools on the XRP Ledger Decentralized Exchange (DEX). Previously, the network had prohibited tokens with clawback features from participating in these pools. This change marks a significant development in enhancing liquidity on the XRPL.

However, not everyone is convinced that this amendment aligns with the decentralized nature of the XRP Ledger. Wendy O, a renowned market commentator and host of The O Show, publicly voiced her concerns about the change, suggesting that the activation of the AMMClawback amendment makes the XRPL more centralized. Wendy's remarks have sparked discussions throughout the XRP community, with proponents of decentralization seeking to clarify how the clawback feature works and its impact on the XRPL's consensus model.

Wendy O Claims XRPL Is No Longer Decentralized

Wendy O expressed her concerns about the AMMClawback amendment, arguing that the introduction of the feature indicates a move towards centralization. According to Wendy, the fact that the amendment allows tokens with clawback features to be traded on AMM pools contradicts the core principles of decentralization. She further questioned whether the community fully understood the implications of the feature.

Despite her reservations, Wendy confirmed that she had thoroughly covered the topic but maintained that the amendment undermines the decentralized ideals that XRP was founded upon.

Moon Lambo Defends XRPL’s Decentralized Nature

In response to Wendy O's claims, Moon Lambo, a prominent figure in the XRP community, stepped forward to refute the accusation that the XRPL has become centralized. Moon Lambo emphasized that the clawback feature does not impact XRP itself and does not alter the decentralized nature of the XRPL.

He explained that decentralization is defined by the freedom of participants to create tokens with various features, including the ability to enable clawbacks. If a central authority restricted users from issuing such tokens, that would represent true centralization. However, as long as participants can issue tokens with specific functions, the XRP Ledger remains decentralized.

Moon Lambo also highlighted that the amendment's approval process, in which more than 80% of validators supported the change over two weeks, adhered to XRPL's decentralized governance model. The validator voting system, which determines changes to the ledger, remains intact, further reinforcing the network's decentralized foundation.

Clawback Feature: What It Really Means for Token Issuers

The clawback feature allows token issuers to reclaim tokens under certain conditions, often to meet regulatory requirements. However, this feature applies only to issued tokens, not to the XRP token or the overall network. Moon Lambo used an analogy to further explain that having control over one's personal wallet does not mean controlling the entire blockchain. Similarly, Ripple has control over the issuance and management of RLUSD but does not control XRP or the broader XRPL ecosystem.

This distinction is crucial for understanding why the clawback feature does not compromise the decentralized nature of XRP. Token issuers can manage their assets as they see fit, but they do not have the authority to change the rules of the network or override the validator consensus that governs XRPL's decentralized operation.

XLS-39 and XLS-73 Amendments: Key Features for Issued Tokens

The XLS-39 amendment, which was introduced in February 2024, laid the groundwork for enabling the clawback functionality for issued tokens. Under this amendment, issuers must decide whether to implement the clawback feature at the time of the asset's issuance.

The XLS-73 amendment, which became active in January 2025, allowed tokens with the clawback feature to interact with AMM pools, while ensuring that frozen tokens cannot enter these pools to comply with regulations. These amendments specifically apply to issued assets that require trustlines, such as RLUSD. Notably, XRP does not require a trustline and, as such, is unaffected by these changes.

Debunking the Centralization Myth

WrathofKahneman (WOK), another prominent member of the XRP community, further clarified that although certain issued tokens, such as RLUSD, may have centralized features, it does not imply that XRPL itself is centralized. WOK emphasized that the XRP Ledger continues to be designed to support a variety of financial models, enabling a broad range of assets with varying levels of centralization.

The XRPL itself remains decentralized, as evidenced by the community-driven governance model, which allows validators to vote on changes to the ledger, including amendments like AMMClawback. This decentralized governance ensures that no single entity can control the network or alter its underlying principles.

The Future of Decentralization on the XRP Ledger

The discussions surrounding the AMMClawback