Slippage
CryptoGlossary term
Definition
The difference between the expected price of a trade and the actual price at which it is executed, usually caused by low liquidity or high market volatility. In DeFi, slippage commonly occurs when trading on DEXs because the price can shift between the time you submit a transaction and when it is confirmed. Most DEXs allow you to set a slippage tolerance to prevent trades from executing if the price moves beyond an acceptable range.
Related terms
- DEX (Decentralized Exchange)A cryptocurrency exchange that operates without a central authority, allowing users to trade directly with one another through smart contracts. Unlike centralized exchanges, DEXs do not hold users' funds and typically do not require identity verification. Popular examples include Uniswap and SushiSwap, which use liquidity pools instead of traditional order books.
- Liquidity PoolA collection of cryptocurrency funds locked in a smart contract that provides liquidity for decentralized trading, lending, or other DeFi activities. Users who contribute assets to a liquidity pool are called liquidity providers and earn a share of the trading fees generated by the pool. These pools are essential for DEXs to function because they replace the traditional order book model used by centralized exchanges.
- Gas FeeA transaction fee paid to validators or miners on a blockchain network to process and confirm transactions. On Ethereum, gas fees fluctuate based on network demand, meaning they can be very low during quiet periods and spike during times of high activity. Understanding gas fees is important because they directly affect the cost of sending crypto, swapping tokens, or interacting with smart contracts.
- DeFi (Decentralized Finance)A broad category of financial applications and services built on blockchain networks that operate without traditional intermediaries like banks or brokerages. DeFi platforms allow users to lend, borrow, trade, and earn interest on their crypto assets through smart contracts. This ecosystem aims to make financial services more accessible, transparent, and open to anyone with an internet connection.
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