How Does Slippage Tolerance Setting Affect a User’s Vulnerability to a Sandwich Attack?
Slippage tolerance is the maximum percentage price movement a user is willing to accept for a trade to execute. A higher slippage tolerance makes a user more vulnerable to a sandwich attack because it gives the front-running bot a larger price range to exploit.
The bot can execute its trades knowing the victim's transaction will still go through, even at a significantly worse price. Setting a low tolerance can cause the victim's trade to fail, but protects them from the attack.
Glossar
Optimal Slippage Tolerance
Balance ⎊ Optimal Slippage Tolerance represents the strategically determined maximum percentage difference between the expected trade price and the worst acceptable execution price, striking a crucial balance between execution certainty and cost minimization.
Sandwich Attack
Attack ⎊ Sandwich Attack is a specific form of front running where an attacker executes a buy order immediately before a victim's large intended buy order and then executes a sell order immediately after, effectively sandwiching the victim's transaction between two profitable trades for the attacker.
Vulnerability
Exposure ⎊ Vulnerability within cryptocurrency, options, and derivatives manifests as quantifiable risk to capital stemming from imperfectly hedged positions or systemic dependencies.
Slippage Tolerance Setting
Parameter ⎊ Slippage tolerance, within cryptocurrency, options, and derivatives trading, represents the maximum acceptable difference between the expected price of a trade and the price at which the trade is actually executed.
Slippage Tolerance
Mechanism ⎊ Slippage tolerance, within cryptocurrency, options, and derivatives trading, defines the maximum acceptable difference between the expected price of a trade and the price at which the trade is actually executed.
Slippage Setting Influence
Parameter ⎊ Slippage setting influence refers to the impact of a user-defined parameter on the execution of trades in decentralized exchanges (DEXs).