What is slippage in crypto? Tolerance, price impact and floors

Slippage is the gap between the price you were quoted and the price your trade actually executes at. If a swap quotes you 1,000 of a token and you receive 993, you took 0.7% slippage. It is not a fee, and nobody collects it by default; it is what happens when the market a quote described is no longer exactly the market your transaction lands in.

Every swap interface has settings and warnings built around this one idea, and most bad trades trace back to misreading them. This guide covers what slippage is, why it happens, the difference between slippage tolerance and price impact (the two get conflated constantly), and how automatic slippage sizing works, using Splitshot on Robinhood Chain as the worked example.

Why slippage happens

Two separate things get filed under "slippage," and they behave differently.

Your own trade moves the price. AMM pools price assets from the ratio of tokens they hold. Every trade shifts that ratio, so every trade moves the price against itself: the larger your trade relative to the pool's depth, the worse your average execution. A $100 swap in a deep ETH pool barely registers. The same $100 in a pool holding $2,000 of liquidity moves the price noticeably. This portion is called price impact, and it is deterministic: the router can compute it before you sign, and it shows up in the quote itself.

The market moves before your trade lands. Between the moment you see a quote and the moment your transaction is included in a block, other trades hit the same pools. If someone buys ahead of you, your fill is worse than quoted; if someone sells, it can be better. This portion is unpredictable, and it is the part your slippage settings exist to bound.

Slippage tolerance is not price impact

This is the most common confusion in DeFi, so it deserves its own section.

• Price impact is the cost your own trade size imposes, given current pool depth. It is already reflected in the quote before you sign. You cannot set it; you can only reduce it by trading smaller or finding deeper liquidity.
• Slippage tolerance is how much additional movement beyond the quote you are willing to accept before the trade should fail instead of filling.

A trade can have 3% price impact and execute with zero slippage: you knew the cost going in, and the market did not move. Another trade can have 0.05% impact and still slip 1% because the pool was busy in the seconds before inclusion.

The confusion matters because people respond to a scary price impact warning by raising their slippage tolerance. That does nothing about impact. It only widens the range of even-worse fills the trade is allowed to accept.

How the minimum-received floor works

Slippage tolerance is not enforced as a percentage. Under the hood it becomes a hard number: the minimum amount of the output token your swap must deliver. The interface takes the quoted output, reduces it by your tolerance, and writes that floor into the transaction. The router contract then enforces it on-chain: if the fill would come in under the floor, the entire transaction reverts. You keep your input tokens and lose only the gas.

That floor is the actual protection. The percentage in the settings popover is just how the floor gets derived. Exact-output swaps flip the same mechanism around: you specify the amount you want to receive, and the transaction instead enforces a maximum on what can be spent, refunding any unspent input.

When to worry

• Thin pools. The real cost here is usually price impact, not slippage. Check the impact figure in the quote, and either trade smaller or accept the cost knowingly.
• Volatile moments. Quotes go stale fast when a token is moving. Expect more reverts with tight tolerances, and requote rather than pre-emptively loosening.
• Tolerance set too wide. On chains with a public mempool, pending transactions are visible before they are included, and a wide tolerance broadcasts exactly how bad a fill you are contractually willing to accept, which is information bots can trade around. Even without that, a wide floor means ordinary volatility can hand you a materially worse fill that a tighter floor would have rejected.
• Tolerance set too tight. The failure mode is softer but real: repeated reverts, gas paid for nothing, and a worse price by the time you finally fill.

Robinhood Chain changes one part of this picture: it has no public mempool, and transactions are sequenced first come, first served, so pending trades are not visible before inclusion and the classic sandwich setup has nothing to watch. Tight floors still matter there, because they protect against ordinary price movement between quote and inclusion.

How automatic slippage sizing works

A flat default tolerance is wrong in both directions at once: too loose for a small trade in a deep pool, sometimes too tight for a large trade in a thin one. Automatic sizing fixes this by measuring instead of guessing.

Splitshot's implementation works like this: before quoting, it probes a fraction of your trade to measure the price impact your specific trade actually produces in the pools it will route through. The tolerance is derived from that measurement and clamped to a range of 0.10% to 5%. A small trade in a deep pool gets a floor near 0.10%, tight enough that almost any adverse movement rejects the fill. A large trade in a thin pool gets a proportionally wider tolerance, capped at 5% so the floor never becomes meaningless. A manual setting is still available in the settings popover if you want to override it.

The principle travels beyond any one DEX: a good slippage number describes the trade in front of it, not a global average of all trades.

Habits that cover most of it

1. Read the price impact in the quote before signing. That cost is certain, and no slippage setting changes it.
2. Let tolerance match the trade: tight for small trades in deep pairs, wider only when the measured impact justifies it.
3. Treat a revert as information. The market moved past your floor; requote at the current price instead of cranking the tolerance until the trade goes through.
4. Verify the fill afterward on the explorer, and check token pages on /price before trading anything unfamiliar.

If you want to see the floor mechanics in a live interface, the walkthrough in how to swap on Robinhood Chain goes through a full swap, including where the automatic tolerance shows up and how to override it.