Important DeFi concepts, such as slippage, must be understood for informed trading. These concepts are essential for traders and serve as the basis for evaluating the honesty and openness of DeFi projects.
Slippage is the difference between the anticipated price and the actual execution price of a trade. It is affected by market volatility, liquidity, and the size of the trade.
For example, if a trader expects to buy a token at $100 but ends up paying $102, the $2 difference represents slippage of 2%.
The slippage tolerance set by the user defines the upper limit of this trade range, ensuring that the transaction will not execute if the price exceeds this limit.
Fee markets are competitive environments in which users offer fees to validators to prioritize their transactions. This process is driven by network congestion and user demand.
A situation in which an additional percentage is taken on top of the required slippage for a transaction does not conform to the conventional definitions of slippage or fee market.
For example, a trader sets 10% slippage but only 2% is required by network conditions, (market volatitly, liquidity and the size of the trade) the 8% remainder is still taken and collected as a cost of the transaction.
This is a deliberate markup, transaction commission, spread or some other form of transaction fee. This fixed percentage, which is treated as a minimum trade range, is unrelated to market conditions or transaction priority in the same way, and highlights the importance of integrity and transparency on trading platforms.
From the CRCI perspective, the user protections surrounding interactions with this feature are our primary concern. We emphasize the significance of transparency, clarity, and documentation so that the user is overwhelmingly supported and informed of any interactions that could result in potential unintended or unwanted asset losses.
We recognize that until now, our ecosystem builders have had no operational standards for which to be measured, from a first-principles fundamental analysis point of view. We are building an outlet for which, our DeFi builders can uniquely demonstrate their commitment to accountability and how they can separate themselves as leaders in DeFi, regardless of their CRCI Score.
If this effort resonates with your values for our ecosystem, we would love your support for our project to help us accelerate our efforts to formalize standards and spotlight our builders who value transparency, user protections, and excellence as much as we need them to.