What Is 'Slippage' in a DEX and How Is It Related to the Smart Contract's Liquidity Pool? ▴ Learn

What Is ‘Slippage’ in a DEX and How Is It Related to the Smart Contract’s Liquidity Pool?

Slippage is the difference between the expected price of a trade and the price at which the trade is actually executed. In a DEX, this occurs because large trades significantly alter the ratio of assets in the smart contract's liquidity pool.

The Automated Market Maker (AMM) formula adjusts the price based on this ratio change. The lower the liquidity in the pool, the higher the potential slippage for a given trade size.

Define ‘Slippage’ in the Context of DEX Trading

What Is a “51% Attack” and How Does the Cost of Altering Merkle Trees Relate to It?

How Do ‘Trading Costs’ within the ETF Differ from the Stated Expense Ratio?

Explain the Concept of “Impermanent Loss” in Decentralized Finance (DeFi) Liquidity Pools