Slippage

Slippage happens when a trade executes at a different price than quoted. On an order book, a large order consumes multiple price levels and the average fill is worse than the best price shown. On an automated market maker, each trade changes the pool's ratio, so bigger trades move the price more. Slippage is quoted as a percentage of the expected price.

Example: a pool holds 100,000 USDC and 50 ETH, implying a price of 2,000 dollars per ETH. Buying 5 ETH removes 10 percent of the ETH side and pushes the price up noticeably, so the buyer pays an average well above 2,000 dollars. The same 5 ETH bought from a pool with 10 million dollars of liquidity would have almost no slippage.

Decentralized exchange interfaces let users set a slippage tolerance, often 0.5 to 1 percent by default. If the price moves beyond that tolerance before the transaction confirms, the trade fails rather than filling at a bad price. Setting tolerance very high makes the trade more likely to go through but exposes it to front-running bots.