Slippage refers to the difference between the “expected price” when you initiate a trade and the final actual execution price. In on-chain trading (especially on AMM-based DEXs), slippage is common and cannot be completely avoided.
A simple example
You expect to use 100 USDT to buy 1 ETH (100 USDC/ETH), but the execution price becomes 101 USDT/ETH. Why?
After you send out the transaction, it will first enter the mempool and wait in line. Before it is packaged and confirmed, other people's transactions may be executed first, changing the pool’s token ratio and price. As a result, when your transaction is executed, the USDC needed to buy 1 ETH may have changed from 100 to 101.
Slippage is the price caused during this waiting-and-execution process, so:
- Absolute slippage: 101 − 100 = 1 USDC
- Relative slippage: 1 ÷ 100 = 1%
Supplement
Other people’s transactions can often be executed first because they paid a higher gas / tip, so miners/validators will prioritize packaging them.
Price changes may come from normal trades, and may also come from behaviors such as MEV / sandwich attacks.
Summary
Slippage refers to the difference between the “expected price” when you initiate a trade and the final actual execution price. In on-chain trading (especially on AMM-based DEXs), slippage is common and cannot be completely avoided.