Price Imapct Handling

This section explains what price impact is, how it arises, and how Dzap handles it, offering users the ability to make swaps with minimal impact on the price they receive.

What Is Price Impact?

Price impact refers to the difference between the expected value of the tokens you intend to swap and the actual value of the tokens you receive in return. The larger the trade or swap, the greater the potential for price impact. It's important to note that Dzap is designed to mitigate and control price impact, ensuring a favorable trading experience for its users.

On the other hand, slippage is distinct from price impact. Slippage occurs due to changing market conditions between the time a transaction is submitted and its confirmation. Price impact, on the other hand, is influenced by the available liquidity to execute a transaction.

Where Does Price Impact Come From?

Dzap aggregates various DEXs, bridges and aggregator to facilitate a transaction. The price impact is directly influenced by the liquidity available to execute a transaction. on these protocols. As the trade size increases or the demand for a specific trade pair grows, the price impact may also increase.

Measuring and Understanding Price Impact on Dzap.

Dzap provides users with transparent information regarding the price impact for each trade. You can find the price impact, along with the minimum amount of the destination token you'll receive, displayed on the user interface. This information helps you make informed decisions about your trades.

For highly liquid token pairs, such as ETH/DAI, the price impact tends to be minimal. Even sizable trades on such pairs incur little to no price impact due to the abundance of available liquidity from multiple sources.

However, when dealing with less liquid tokens, the price impact can rise more rapidly, even for smaller transactions. In such cases, where the liquidity available is limited, the price impact can increase dramatically, affecting the value of the tokens received.

How Dzap Manages Price Impact?

Dzap efficiently manages price impact by assessing all available aggregators and protocols. The platform calculates the optimal path for a trade, taking into account both the price impact and the associated gas costs. One key strategy employed by Dzap to minimize price impact is the splitting of transactions across multiple pools when possible. This approach ensures that larger trades are broken down into smaller parts to reduce the overall price impact and improve the user experience.