Slippage is the difference between the expected price of a trade and the actual execution price. It occurs because market conditions can change between when you submit a trade and when it executes (on DEXs: price impact from your trade size against available liquidity, plus front-running; on CEXs: order book movement between quote and fill).
What Is Slippage?
3 min read
The short version
Slippage is the gap between the price you see when you click "swap" and the price you actually get. On a DEX, it mostly comes from your trade being large relative to the pool (price impact) or from bots front-running you. On a CEX, it comes from the order book moving before your order fills. Either way, you end up with slightly less than expected.
How It Works
Two types: (1) Price impact (predictable), caused by your trade size moving the price along the AMM curve. Larger trades in smaller pools = more impact. This is calculable before trading. (2) Market slippage (unpredictable), caused by other trades executing between when you submitted and when your transaction is processed. On DEXs: block time delays mean other trades can change the pool state before yours executes. MEV bots exploit this via sandwich attacks. Slippage tolerance: the maximum deviation you accept. If you set 0.5% slippage tolerance and the final price moves more than 0.5% from your expected price, the transaction reverts (protecting you from extreme outcomes). Setting too low = frequent failed transactions. Setting too high = vulnerable to sandwich attacks.
How 1% slippage tolerance works in practice
You swap 10,000 USDC for ETH on Uniswap. Expected output: 3.333 ETH (at $3,000/ETH). You set 1% slippage tolerance, meaning you accept a minimum of 3.300 ETH. Scenario A: The pool state is unchanged when your transaction executes. You receive 3.330 ETH (slight price impact from your trade size). Slippage: 0.09%. Transaction succeeds. Scenario B: Between your submission and execution, another large buy hits the pool first. Your trade now would only yield 3.280 ETH (1.6% worse than expected). This exceeds your 1% tolerance, so the transaction reverts. You keep your 10,000 USDC. You can retry at the new price. Scenario C: A sandwich bot front-runs you, pushing the price to exactly your tolerance boundary. You receive 3.300 ETH (the minimum). The bot profits ~$30 from the price difference.
What People Get Wrong
Slippage is always the DEX ripping you off
Slippage is a market mechanics issue, not a fee. It results from finite liquidity, trade timing, and competing participants. The DEX protocol takes only its stated fee, slippage is the cost of executing in a live market.
Setting slippage to 0% prevents all losses
Setting 0% means your transaction will fail if the price moves even slightly (which it almost always does between blocks). In practice, 0.1%-0.5% is needed for standard trades; volatile tokens may need 1-3%. Too-low settings just cause repeated failures.
Slippage only happens on decentralized exchanges
CEXs have slippage too, market orders on thin order books fill at progressively worse prices. The difference: CEX slippage is from order book depth; DEX slippage is from AMM curve math plus timing. Both are real.
Keep Reading
Sources & Further Reading
- 1inch Network
DEX aggregator that splits trades across pools to minimize slippage
- CoW Swap (MEV Protection)
DEX with batch auction design that protects against sandwich attacks
Questions People Also Ask
- What slippage tolerance should I use?
- For major pairs (ETH/USDC, BTC/ETH): 0.1%-0.5%. For small-cap or volatile tokens: 1%-3%. For tokens with transfer taxes (fee-on-transfer): set to tax % + 0.5%. If transactions keep reverting, increase slightly. If you suspect sandwich attacks, try private transaction services.
- How do I reduce slippage?
- Use DEX aggregators (1inch, Paraswap) to split across pools. Trade during low-activity periods. Break large swaps into smaller ones. Use limit orders instead of market swaps. Use MEV-protected RPCs (Flashbots Protect, MEV Blocker). On CEXs: use limit orders instead of market orders.
- What does "price impact too high" mean?
- The DEX is warning that your trade is large relative to the pool, causing significant price movement (often >5-10%). Solutions: find a pool with deeper liquidity, use an aggregator to split the trade across multiple pools, or reduce trade size.