🏢 XLS-81 Permissioned DEXes

Complete implementation and testing suite for XLS-81 Permissioned DEX system enabling regulated financial institutions to participate in XRPL DEX while adhering to compliance requirements.

Status:Final
Authors:Mayukha Vadari, Shawn Xie
Created:2024-09-12

👛 Wallet Management

Connect your wallet and create additional test wallets for permissioned DEX operations.

Primary Wallet

🏗️ Wallet 1

Generate a new wallet with automatic funding for testing.

🏗️ Wallet 2

Generate a new wallet with automatic funding for testing.

🏗️ Wallet 3

Generate a new wallet with automatic funding for testing.

Permissioned DEXes Overview

What are Permissioned DEXes?

Permissioned DEXes are controlled environments for trading within the XRP Ledger's decentralized exchange (DEX). Trading in a permissioned DEX works like trading in the open DEX, except that a permissioned domain controls who can place and accept offers.

By relying on permissioned DEXes, regulated businesses can participate in trading on the XRP Ledger while ensuring that all the counterparties they deal with have been properly vetted.

There can be multiple permissioned DEXes within the XRP Ledger blockchain. Each one is uniquely associated with a permissioned domain, which acts as an allow-list for accessing that DEX.

Key Concepts

🏢 Permissioned DEX

The subset of the DEX that operates within the rules of a specific domain

🌐 Open DEX

The un-permissioned DEX that has no restrictions

📚 Domain Offers

Offers that can only be filled by other offers within the same domain

🔄 Hybrid Offers

Offers that participate in both domain-specific and open orderbooks

Basic Trading Flow

1

Domain Setup

Owen creates a domain with KYC credentials

2

User Verification

Tracy and Marko obtain required KYC credentials

3

Trading

Users place permissioned offers within domain

Compliance-by-Design Features

Building on XRPL's existing compliance framework:

Existing Features

  • Deposit Auth - Granular fund control
  • Authorized Trustlines - Asset distribution oversight
  • Clawback - Asset reclaim mechanism
  • Freezing - Account restrictions
  • Multisign - Enhanced authorization
  • Payment Paths - Flexible routing

XLS-81 Additions

  • Domain-Based Trading - KYC compliance
  • Permissioned Orderbooks - Regulatory adherence
  • Credential Verification - Identity validation
  • Hybrid Trading - Flexible participation
  • Enhanced RPC Filtering - Compliance queries

Trading Scenarios

📊 Scenario 1: Regulated Institution Trading

Tracy (Regulated Trader)

Places a permissioned USD/EUR offer within Owen's compliance domain

Marko (Market Maker)

Sees arbitrage opportunity and places matching permissioned offer

System

✅ Trade executes successfully - both parties are domain members

🚫 Scenario 2: Cross-Domain Isolation

Marko

Places open EUR/USD offer on public orderbook

Tracy

Places permissioned USD/EUR offer that would cross Marko's

System

❌ No trade - permissioned offers can't fill open offers

System Invariants

🔒 Offer Isolation

  • Permissioned offers only fill within same domain
  • Open offers cannot fill permissioned offers
  • Cross-domain offers remain separate

📍 Orderbook Placement

  • Permissioned offers go to domain orderbooks
  • Open offers stay on open orderbooks
  • Hybrid offers participate in both

✅ Domain Validation

  • Domain membership verified on placement
  • Invalid domain offers treated as unfunded
  • Credential expiration auto-removes offers

Permissioned DEXes Technical Reference

Amendment Information

Amendment: PermissionedDEX
Amendment ID:677E401A423E3708363A36BA8B3A7D019D21AC5ABD00387BDBEA6BDE4C91247E
Status:In Development
Dependencies: Requires Credentials and Permissioned Domains amendments

Transaction Changes

OfferCreate

  • DomainID: Hash256 field to specify permissioned domain
  • tfHybrid flag: 0x00100000 (1048576) for hybrid offers

Payment

  • DomainID: Hash256 field for domain-restricted cross-currency payments

Ledger Entry Changes

Offer

  • DomainID: Domain ledger entry ID
  • AdditionalBooks: Array for hybrid offer directories

DirectoryNode

  • DomainID: Domain ID for offer directories
  • Modified ledger entry ID calculation with domain

API Method Changes

  • book_offers:domain parameter for permissioned order books
  • path_find:domain parameter for domain-restricted paths
  • ripple_path_find:domain parameter for path finding
  • subscribe (books):domain parameter for order book subscriptions

Offer Matching Compatibility

Offer/Payment TypeOpen OfferHybrid OfferPermissioned OfferAMM
Open✅✅❌✅
Hybrid✅✅ ✅ (same domain) ✅
Permissioned❌❌ ✅ (same domain) ❌