Transaction Slippage

Transaction slippage refers to the difference between the expected price of a trade and the price at which the trade is actually executed. In decentralized exchanges, this often occurs due to low liquidity or large order sizes relative to the pool.

In the context of MEV, slippage is frequently exacerbated by searchers who intentionally move prices to capture value. High slippage can be a significant cost for traders, making it difficult to execute large orders without substantial loss.

Users can mitigate this risk by setting slippage tolerance parameters, which cancel the trade if the price deviates beyond a certain threshold. Understanding slippage is critical for quantitative traders and those involved in derivative hedging.

It represents a core friction point in the transition to fully decentralized financial markets.