Slippage

Slippage shows up whenever there is a delay between agreeing to a price and settling the trade. On a blockchain that delay is the time your transaction waits to be included in a block. On a busy order book it is the moment it takes your order to be filled.

How slippage happens

Two forces move the price between the quote and the execution:

• Price impact. On an automated market maker such as Uniswap, a pool's price shifts as your swap runs, so a large swap gets a worse average price than a small one. The less liquidity in the pool, the bigger the effect. On an order book, a large market order fills several price levels.
• Market movement. Other trades land before yours, or the market simply moves while your transaction is pending.

How max slippage protects you

A slippage tolerance tells the protocol the worst result you accept. Uniswap describes it this way: as long as the execution price is within the range, for example 1%, the swap executes. If it ends up outside the range, the transaction fails and the swap does not happen.

In practice the app converts your tolerance into a minimum amount you must receive. If the market cannot deliver that amount, the transaction reverts. On Ethereum-based networks you still pay gas for the attempted execution, as ethereum.org explains.

Choosing the setting is a trade-off. A tight tolerance protects the price but can make trades fail during volatile moments. A loose one gets the trade done but accepts a worse result, and gives other market participants more room to trade ahead of you at your expense.

Slippage and regulated providers

When you buy or sell through a provider instead of swapping on-chain yourself, EU rules shift the risk. Under MiCA Article 77, a provider that exchanges crypto-assets for funds must publish a firm price or a pricing method and execute at the price displayed when the order is final. Providers that execute orders for clients must also seek the best possible result under Article 78. An on-ramp quote you accept is therefore the price you get for that order.

Example

You swap 10,000 USDC for EURC on a decentralised exchange. The app quotes 8,666 EURC, based on a rate of 0.8666 euro per dollar. You set max slippage to 0.5%.

• Minimum received: 8,666 × 0.995 = 8,622.67 EURC.
• If the rate barely moves and you get 8,660 EURC, the swap executes and you have slipped by 6 EURC, well inside your limit.
• If a large trade hits the pool first and your swap would return only 8,600 EURC, that is below the minimum. The transaction reverts, you keep your 10,000 USDC, and you pay the gas fee.

Common confusion

• Slippage is not a fee. Nobody charges it. It is a price difference, and a fee comes on top.
• Stablecoin-to-stablecoin swaps can still slip. Both tokens may hold their pegs while the exchange rate between euro and dollar moves, or the pool may be thin.
• The "minimum received" line is the number to read. It shows the worst case your settings allow.