Skip to main content

Slippage (price slippage): what it is and how it works

Slippage is the difference between the expected price of a trade and the actual price at which it is executed.

In crypto, slippage most often occurs when swapping tokens on a DEX, where the price changes during transaction execution.

Slippage explained simply​

Slippage is a situation where you expect to buy or sell an asset at one price, but end up getting another.

A simple example:

  • you want to buy a token at $100
  • you submit the transaction
  • while it is being processed, the price changes
  • the trade executes at $102

The $2 difference is slippage.

Why slippage happens​

Slippage is directly related to how decentralized markets work.

The main reasons are:

  • price changes during transaction processing
  • insufficient liquidity in the pool
  • high volatility
  • competition for block inclusion

A particularly strong impact comes from MEV bots.

How slippage works on DEX​

Unlike centralized exchanges, DEX platforms do not use a traditional order book.

Prices are determined automatically based on the token balance in the liquidity pool.

The process looks as follows:

  1. a user submits a swap transaction
  2. the transaction enters the mempool
  3. the price may change before it is included in a block
  4. the trade is executed at a new price

As a result, the user receives a different price than expected.

Slippage example​

Suppose:

  • you want to swap 1 ETH for tokens
  • you expect to receive 1000 tokens

But:

  • the price changes at execution
  • you receive 950 tokens

As a result, the loss of 50 tokens is caused by slippage.

Slippage and MEV​

Slippage is often amplified by MEV and sandwich attacks. In simplified form, the process looks like this:

  1. a bot detects your transaction
  2. it inserts its own trade before yours
  3. the price increases
  4. your trade executes at a worse price
  5. the bot immediately sells and captures profit

When slippage is high​

Slippage becomes more significant in the following situations:

  • large trades
  • low liquidity
  • high volatility
  • popular DeFi protocols
  • high network load (high gas fee)

Slippage tolerance​

Most DEX platforms allow users to set slippage tolerance. In practice, it is recommended to keep it within 3–5% at most (and around 0.5–1% for high-liquidity pools).

This means that the trade will only be executed if the price deviation does not exceed the specified level. If the price moves beyond that threshold, the transaction will fail.

Slippage risks​

Slippage is not just a technical effect — it is a real source of losses.

The main risks include:

  • worse execution price
  • hidden losses during swaps
  • exposure to MEV attacks
  • inefficient trade execution

How to reduce slippage​

Slippage cannot be completely eliminated, but it can be reduced.

In practice, this includes:

  • setting a low slippage tolerance
  • choosing pools with high liquidity
  • splitting large trades
  • using less congested time periods
  • using MEV protection tools

Difference between slippage and fees​

It is important to distinguish between:

  • gas fee — the network transaction cost
  • slippage — the change in execution price

Even with low fees, slippage losses can be significant.

Conclusion​

Slippage is an inherent feature of decentralized markets caused by price changes during transaction execution.

It directly affects the final price of a trade and becomes more significant in conditions of high activity and low liquidity.

Understanding slippage helps manage risks and make more efficient decisions when interacting with DeFi.