AMM Swaps: Slippage, Price Impact, and Routing

What you'll learn

• The AMM Revolution
• How AMM Pricing Actually Works
• Uniswap V4 in 2026
• Slippage Tolerance: What It Means and Why It Matters
• DEX Aggregators: 1inch, ParaSwap, 0x, Matcha
• Takeaways and Further Reading

Key terms

Automated market maker (AMM)

A smart-contract liquidity pool that prices trades using a deterministic formula (e.g., constant-product x*y=k) rather than an order book. The dominant on-chain trading model since Uniswap V1 (2018).

Constant-product invariant

The original Uniswap V2 AMM formula: x * y = k, where x and y are the pool reserves of two tokens and k is held constant by trades. Produces price impact proportional to trade size.

Concentrated liquidity

A Uniswap V3/V4 mechanism where liquidity providers deposit capital within a chosen price range instead of from zero to infinity, producing 1,000x-5,000x effective depth around the current price.

Stable-swap

Curve Finance's AMM formula optimized for pegged assets (stablecoin pairs, wrapped variants of the same asset), providing near-zero slippage near the peg with sharply increasing slippage if pushed away from it.

Price impact

The change in marginal price caused by your trade as it moves along the AMM pricing curve; mathematically distinct from a fee, it is the structural cost of trading on a finite-depth pool.

Slippage tolerance

The maximum acceptable price movement between quote and execution on a DEX swap; setting it too high enables MEV sandwich attacks, setting it too low causes failed transactions.

DEX aggregator

A protocol or front-end that queries multiple DEX pools, RFQ venues, and other liquidity sources, then routes your order across the best combination. Examples: 1inch, ParaSwap, 0x/Matcha, Odos.

Uniswap V4 hooks

Smart contracts called at specific lifecycle points of a Uniswap V4 pool (before/after swap, before/after add/remove liquidity), enabling dynamic fees, on-chain limit orders, MEV protection, and other custom behaviors.

Sandwich attack

An MEV strategy where a searcher front-runs a victim's swap to push the price unfavorably, lets the victim execute at the worse price, then back-runs to capture the spread. Enabled by too-high slippage tolerance and public mempool exposure.

MEV (maximal extractable value)

Value that block producers and searchers can extract by reordering, inserting, or censoring transactions within a block. Sandwich attacks, arbitrage, and liquidations are the most common MEV strategies.