Slippage (DeFi)
The difference between the expected price of a trade and the price at which it is actually executed on a DEX.
What is Slippage?
Slippage in DeFi refers to the difference between the price a trader expects to receive when submitting a transaction on a decentralized exchange and the price they actually receive when the transaction is executed. Slippage occurs for two reasons: price impact and price movement. Price impact happens because AMMs automatically adjust the price as a function of trade size relative to pool size — a large trade against a small pool moves the price significantly before execution completes. Price movement slippage occurs when the price changes between when a transaction is submitted and when it is mined, particularly on congested networks. DEX interfaces allow users to set a 'slippage tolerance' — a maximum acceptable price deviation (e.g., 0.5%) before the transaction reverts automatically. Setting slippage too low causes frequent transaction failures; setting it too high invites MEV sandwich attacks that exploit the permitted price window.
Example
A trader tries to swap $100,000 of ETH for USDC on a Uniswap pool with $500,000 total liquidity. Due to price impact from the large trade size relative to the pool, they receive 2% fewer USDC than the pre-trade price implied. They set a 3% slippage tolerance to ensure the trade executes, but a MEV bot uses that window to sandwich the trade, extracting additional value.
Source: Uniswap Protocol Documentation