Ever tried to buy something at one price but ended up paying more? That’s exactly what slippage is in crypto trading. Let’s break it down in about one minute.
Slippage happens when the price you expect to pay differs from what you actually get. You want to swap 100 USDC for Ethereum at $3,000 per ETH, expecting 0.033 ETH, but you receive 0.032 ETH. That difference is slippage.
On decentralized exchanges like Uniswap, prices come from liquidity pools, not order books. When you trade, you’re buying from these pools. Large trades can move the price within the pool, especially with low liquidity. It’s like buying all the apples from a small fruit stand – the price goes up as supply gets scarce.
Most DEXs let you set slippage tolerance between 0.5% to 3%. Set it too low, your transaction fails. Set it too high, you lose money. For stablecoins, use 0.5%. For volatile tokens, try 2-3%. Trade smaller amounts to reduce slippage impact.
Remember, slippage can work both ways – sometimes you get better prices than expected. Understanding slippage helps you trade smarter on DEXs.
