Slippage & Pricing

Price Formation Mechanism

DotSwap Nexus determines execution prices through sophisticated liquidity curve aggregation from active Makers and DotSwap Pool, creating unified depth-by-price order books that enable optimal routing decisions.

The price formation process operates continuously, incorporating real-time updates from all liquidity sources to maintain accurate market depth information. This approach ensures that users receive competitive pricing while liquidity providers can optimize their strategies based on market conditions.

Slippage Component Analysis

Impact Slippage: Price movement directly caused by trade size relative to available depth at optimal price levels Volatility Slippage: External price changes occurring between quote generation and final confirmation Routing Slippage: Additional price impact resulting from multi-source execution and optimization trade-offs

User Protection Framework

The protocol provides comprehensive tools enabling users to manage execution risk according to their specific requirements:

Risk Management Controls:

Parameter
Default Setting
Customization Range
Purpose

Slippage Tolerance

9%

1% - 50%

Maximum acceptable price deviation from quote

Fee Ceiling

Dynamic

User-defined maximum

Prevention of excessive execution costs

Execution Deadline

6 blocks

1-100 blocks

Time-based expiration for trade validity

Route Preference

Optimal price

Speed/price/liquidity priority

Execution optimization criteria

PSBT Slippage Guard Implementation

The protocol embeds sophisticated slippage protection directly into transaction structure, ensuring automatic execution failure if final receive amounts fall below acceptable thresholds. This approach provides mathematical guarantees rather than relying on external monitoring or intervention.

Technical Implementation:

  • Conditional outputs encoding minimum acceptable execution rates

  • Automatic transaction invalidation for unacceptable slippage scenarios

  • Real-time validation during signature collection process

  • Transparent execution criteria visible to all participants

Execution Quality Examples

CPMM Pool Execution: 1 BTC trade against 100 BTC/10k ORDI pool typically results in approximately 10% price impact due to uniform liquidity distribution

CLMM Range Execution: Equivalent trade within concentrated 120-130 DOG/BTC range achieves approximately 1% impact through focused liquidity deployment

Multi-Maker Routing: Large trades benefit from liquidity aggregation across multiple sources, often achieving superior execution compared to single-source alternatives

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