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What does Uniswap slippage mean (Uniswap slippage calculation)?

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What does Uniswap slippage mean? The UNI price incurs slippage in a transaction

What does Uniswap slippage mean (Uniswap slippage calculation)?

What does Uniswap slippage mean? The UNI price incurs slippage in a transaction. Specifically, when you deposit funds into a specific liquidity pool and hold tokens (due to LP not doing any preparatory work), “slippage” occurs.

For Uniswap, a decentralized exchange based on the Ethereum blockchain, “slippage” refers to the profit quantity obtained by exchanging a certain asset, which is proportional to the price of that asset. If a user transfers to Uniswap, the fees charged will immediately decrease, making the system more stable; otherwise, it will prevent the user from withdrawing their funds.

Uniswap slippage calculation

Editor’s note: This article is from BlockBeats (ID: BlockBeats), authorized by Odaily Planet Daily.

The slippage calculation method for Uniswap V2 is represented by the square product of current liquidity. Currently, this indicator has been verified and tested on the Ethereum network.

By calculating the slippage, it is possible to determine which protocols/contracts will be used to calculate the transaction fee paid by users to Uniswap; for example, the ETH-USDT pool on Uniswap has two price variables (one is $100) – Curve and SushiSwap.

From the above figure:

Slippage = Slippage x Exchange Rate * Slippage x Slippage

Is there a relationship between slippage and slippage? We can use the simplest formula as shown in the following figure.

There is an important piece of information here, that is, the smaller the liquidity, the faster the transaction. If the liquidity is too large, the transaction fee will be consumed. This is because both liquidity and funds are secure, otherwise the slippage would not be so significant. (Reference: https://uni.sushiswap.org/t/eth)

For Uniswap, slippage is also a relatively high requirement. But for most decentralized exchanges, slippage is not high.

Due to the large number of liquidity providers and the slow transaction speed, Uniswap often encounters many issues with slippage. For example, whether it is necessary to wait for one confirmation or repositioning during the transaction.

In order to better understand this situation, we assume that the price of utility is set as a slippage function. Suppose you need to wait for about 1 minute to complete the following steps in a transaction: after the first step is completed, your liquid funds will be immediately converted back to the original specified market price and sent to your trading account; after the second step is completed, your liquid funds will return to the original market price and be transferred back to the new order book during the transaction time. Then you can cancel any margin trades (such as vault, etc.) before the start of the transaction, without having to wait for an additional 2 seconds or a shorter time to execute the transaction.

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