Price Impact vs Slippage in AMM Trades
Distinguish the curve effect of trade size from execution uncertainty, and explain how a slippage limit relates to a quoted minimum output.
Overview
When translating these concepts into an integration, keep the scope described by the wallet history api with the result. The examples in wallet transaction history and smart contract event logs show how the same distinction affects neighbouring data questions.
Price impact and slippage are often used interchangeably, but they describe different comparisons. A clear quote record identifies the reference state, expected output and permitted execution boundary.
Use two comparisons
Price impact concerns how a finite trade interacts with available liquidity relative to a reference price. Slippage commonly describes the difference between a quote or expected execution and the realised outcome. A slippage tolerance is a user constraint; it is not an estimate of market depth or a promise that a trade will execute.
Worked example: an output boundary
A quote expects one hundred output units and the user permits one percent downside under a simplified minimum-output rule. The transaction requires at least ninety-nine units. A later state may make the transaction revert instead of delivering fewer than that threshold. The tolerance does not eliminate network fees on a failed attempt.
Store the quote context
Keep input size, route, block reference, quoted output, minimum output and actual output separately. Test price movement after quoting, fee-on-transfer assets and multi-hop routes. Explain which comparison a displayed percentage uses. Without a stated denominator and reference, two identical percentage labels can describe different economic effects.
A practical acceptance test
Quote one hundred output units with a simplified minimum of ninety-nine. Test execution at one hundred, exactly ninety-nine and a state that cannot satisfy the minimum. The final case should be a failed or unavailable execution under the relevant rules, not a fabricated delivery below the limit. Preserve the reference used for each displayed percentage.
Questions about the topic
Frequently asked questions
Is slippage tolerance a guaranteed loss?
No. It is an execution constraint, not a predicted outcome.
Can a transaction fail despite a valid earlier quote?
Yes. State or execution conditions can change.
Standards & technical documentation