What is Slippage?
Slippage occurs when there is a difference between the expected price of a swap and the price at which the swap is actually executed. This discrepancy arises due to market volatility and the time delay between the initiation of a swap and its execution. In essence, slippage is the price variation that you are willing to encounter when the market moves during the processing of a swap.
Causes of Slippage
Several factors can contribute to slippage, including:
- Market Volatility: When a token’s price moves significantly.
- High Swap Volume: It may not be possible for large swap amounts to be filled at a single price point, leading to parts of the order being filled at varying prices.
- Low Liquidity: In markets or assets with low liquidity, the lack of available liquidity can result in larger slippage.
Slippage Tolerance
When you select the slippage percentage on Squid, this represents the maximum percentage of slippage you are willing to accept for your swap to be executed. Setting a slippage tolerance helps to control any potential losses due to price movements during the execution phase of a swap.
If in the unlikely case the trade fails due to too-low slippage, you may receive a different token to what you expected on the destination chain. This token is the asset Squid used to route your order across chains. Examples of Squid routing tokens include axlUSDC.
Does Squid keep my positive slippage?
No, Squid does not keep positive slippage on swaps.