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How Does Slippage in AMMs Protect Liquidity Providers from Large, Sudden Trades?

Slippage makes large trades increasingly expensive, acting as a financial deterrent that protects liquidity providers from pool drainage.
Greeks.Live21.11.25

How Does Slippage in AMMs Protect Liquidity Providers from Large, Sudden Trades?

Slippage is the difference between the expected price of a trade and the price at which it is executed. In AMMs, larger trades cause greater slippage because they have a larger impact on the ratio of assets in the pool.

This acts as a natural defense mechanism for liquidity providers. As a trade gets larger, the price becomes progressively worse for the trader, making it prohibitively expensive to drain a significant portion of the pool's assets.

This disincentivizes large, manipulative trades and protects the capital of liquidity providers.

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