Price impact & Slippage
Price impact & Slippage¹ overview
Price impact
In an AMM, larger orders at once would disrupt the balance of liquidity in a pool, as if they were made separately, prices would change between one swap and another.
Price impact is the percentage change of NTFs prices on a SnF | AMM swap operation, to reduce a given trade impact in a pool and escalating with the amount bought. Always following the x*y=k curve, the Operated Price (OP) defines the price impact percentage.
TP: Total Paid on swap
NP: Nominal Price (price of NFT at operation time)
PI: Price Impact
OP: Operated Price
NP: Nominal Price
Slippage
Slippage, as in price impact, is a percentage variation on prices, that could occur on pending transactions. But instead of being caused by users own trades, occurs as a result of blockchain transactions queue order. In Ethereum, users can decide how much gas they're willing to spend on a given transaction. This defines the execution order, the higher the gas offer, lower the time to execute. The opposite is also true. Pools may have other interactions while a given transaction is pending, and since this period is defined by blockchain network status at the time (i.e. number of transactions submitted and number of pool interactions), pending transactions may encounter a different asset pricing in submission and execution time. Slippage tolerance is the users limit to price variation during the time a swap is pending. So if the price at execution is out of the tolerance range, the transaction will fail.
This box allows the users to:
Set the maximum percentage variation caused by slippage;
Set the maximum time for a transaction to be executed.
Both Price impact & Slippage are directly related to the amount of liquidity deposited in a pool. ¹ Although similar possibilities of changes in swap prices, they are both different and could interfere in the final prices separately.
Last updated
