What are slippage (price slippage) and price impact?
Slippage (price slippage) is the difference between the price you expect and the price that occurs in a DEX transaction. As the liquidity pool grows and your transaction shrinks relative to the pool, this difference decreases. Paribu manages slippage for you automatically; it stops transactions whose price impact rises too high, for your security.
Why does slippage occur?
On a DEX, the price is determined by the balance in the liquidity pool. Because a large transaction changes the balance in the pool, the price that occurs may be slightly different from the expected one. The larger the pool and the smaller the transaction relative to that pool, the lower the slippage.
How does Paribu manage slippage?
- The slippage tolerance is set automatically by Paribu
- This value is adjusted in the background for you; you do not see a separate slippage setting you can intervene in on the screen
- The aim is to ensure that your transactions are carried out at a reasonable price
What happens if the price impact is too high?
In some transactions, especially with low-liquidity tokens or large amounts, the price impact can increase significantly. In this case, Paribu warns you in stages and stops the transaction if the impact rises too high:
| Price impact | Behavior |
|---|---|
| Low | The transaction proceeds in its normal flow |
| Medium | An informational warning is shown |
| High | An additional warning with a confirmation checkbox is shown |
| Very high | The transaction is stopped for your security |
Info: These thresholds are designed to prevent you from transacting at an unexpected price.
Important information
- Slippage is a natural part of a DEX and depends on the pool size
- The slippage tolerance is managed by Paribu; it cannot be changed by the user
- If the price impact is too high, the transaction cannot be made
Frequently asked questions
Can I change the slippage setting myself?
No. The slippage tolerance is set automatically by Paribu and cannot be changed by the user.
Why was my transaction stopped for "high price impact"?
This is to prevent you from transacting at an unexpectedly disadvantageous price. You can try with a smaller amount or with a token that has higher liquidity.
Is slippage a fee?
No. Slippage is not a fee but a price difference resulting from the pool balance. The provider fee, on the other hand, is shown separately as a single line.
Related articles
- What are a DEX (decentralized exchange) and a liquidity pool? — The logic of a DEX and a liquidity pool (AMM)
- How do I buy a token on a DEX? — Steps for buying a token on a DEX and the confirmation process
Author:
Paribu