Skip to main content

Slippage

Slippage occurs when the actual execution price of a trade differs from the expected price at the time you submit the transaction. This is a fundamental concept in automated market makers (AMMs) like gSwap.

What Causes Slippage?​

Price Impact​

When you trade against an AMM pool, your trade size affects the token ratio in the pool, which changes the price:

  • Large trades relative to pool size cause more price impact
  • Small trades in deep pools have minimal price impact

Market Movement​

Between the time you get a quote and your transaction executes, other traders may have submitted transactions that change the pool's state:

  • Other swaps can move the price before your transaction processes
  • Network congestion can delay your transaction
  • Market volatility can cause rapid price changes

Pool Depth​

Pools with more liquidity (total value locked) provide better prices and less slippage:

  • Deep pools: More resistance to price impact from individual trades
  • Shallow pools: Higher sensitivity to trade size

Types of Slippage​

Positive Slippage​

When you receive a better price than expected:

Expected: Sell 100 $GALA for 50 USDC
Actual: Sell 100 $GALA for 52 USDC
Positive slippage: +2 USDC

This can happen when prices move in your favor between quote and execution.

Negative Slippage​

When you receive a worse price than expected:

Expected: Sell 100 $GALA for 50 USDC
Actual: Sell 100 $GALA for 48 USDC
Negative slippage: -2 USDC

This is a negative outcome and is why slippage protection is important.

Slippage Protection​

Exact Input Swaps​

When selling a specific amount, set amountOutMinimum to protect against excessive slippage:

const pendingTx = await gSwap.swaps.swap(
  'GALA|Unit|none|none',
  'GUSDC|Unit|none|none',
  FEE_TIER.PERCENT_01_00,
  {
    exactIn: '100', // Sell exactly 100 $GALA
    amountOutMinimum: '47.5', // We'll accept as little as 47.5 USDC (5% slippage tolerance from our expected 50 USDC)
  },
  walletAddress,
);

If the actual output would be less than 47.5 USDC, the transaction fails rather than executing at a bad price. The chaincode will guarantee that you will not receive less than the specified minimum.

Gas Fees

Unlike most DEXs, there is no gas fee on gSwap for failed swaps, including those that fail due to slippage protection.

Exact Output Swaps​

When buying a specific amount, set amountInMaximum to limit how much you're willing to pay:

const pendingTx = await gSwap.swaps.swap(
  'GALA|Unit|none|none',
  'GUSDC|Unit|none|none',
  FEE_TIER.PERCENT_01_00,
  {
    exactOut: '50', // Buy exactly 50 USDC
    amountInMaximum: '105', // Pay maximum 105 $GALA (5% slippage tolerance compared to our expected 100 $GALA)
  },
  walletAddress,
);

If more than 105 $GALA would be required, the transaction fails.

Setting Slippage Tolerance​

Conservative (0.1% - 0.5%)​

  • Best for stable token pairs (stablecoins)
  • Low volatility environments
  • Risk: Higher chance of transaction failure

Moderate (0.5% - 1.5%)​

  • Good for most token pairs
  • Balanced approach between execution and protection
  • Recommended for most users

Aggressive (2% - 5%)​

  • Volatile token pairs
  • Fast-moving markets
  • Large trades in shallow pools
  • Risk: Potential for significant value loss

Best Practices​

Get Fresh Quotes​

Always get a recent quote before executing large trades:

// Get fresh quote for exact inpu
const quote = await gSwap.quoting.quoteExactInput(
  'GALA|Unit|none|none',
  'GUSDC|Unit|none|none',
  '100',
);

// Calculate slippage protection based on quote
const slippageTolerance = 0.01; // 1%
const amountOutMinimum = quote.outTokenAmount.multipliedBy(1 - slippageTolerance).toString();

// Execute with slippage protection
const pendingTx = await gSwap.swaps.swap(
  'GALA|Unit|none|none',
  'GUSDC|Unit|none|none',
  quote.feeTier,
  {
    exactIn: '100',
    amountOutMinimum,
  },
  walletAddress,
);

Consider Trade Size​

  • Small trades: Use tighter slippage (0.1-0.5%)
  • Large trades: May need higher tolerance (1-3%)
  • Very large trades: Consider splitting into smaller trades across the different fee tiers

Monitor Pool Conditions​

  • Check pool liquidity before large trades
  • Consider multiple fee tiers for better execution
  • Be aware of market volatility
  • Price Impact - How trade size affects execution price
  • Liquidity - Understanding pool depth and concentration
  • Fee Tiers - How different fee levels affect trading costs

Understanding slippage is crucial for successful trading on any AMM. Always use appropriate slippage protection and consider market conditions when setting tolerance levels.