Curriculum·J302 Swap Execution: AMMs, MEV, and DEX Architectures·about 42 min
Price impact and slippage
By the end of this lesson you can
- →Separate pool price, price impact and slippage, which are three different costs
- →Explain what a slippage tolerance authorises, since it reduces nothing
- →Determine which invariant a pool uses before estimating the cost of a trade
- →Choose a tolerance by pricing a reverted transaction against a bad fill
Junior · enrolled learners
This lesson opens with The Curve stETH pool, June 2022.
- What happened
- Lido's stETH was backed close to one to one by ETH deposits, but withdrawals were not yet enabled, so the only way out was to sell it on a secondary market, and the deepest was the Curve stETH and ETH pool. Through June 2022 large holders exited. Celsius was withdrawing at a reported rate near 50,000 ETH a week and sold stETH to raise liquidity, Alameda Research sold about $88M of stETH, Three Arrows Capital redeemed roughly 400,000 ETH and stETH in May, and a single whale removed 84,000 ETH from the pool. The pool skewed to roughly 78 percent stETH and 22 percent ETH. On 10 June the pool priced stETH at 0.9474 ETH, a discount of about 5 percent against an asset whose backing had not changed.
- The decision point
- Nothing about stETH's redemption value moved. What moved was the ratio of two balances in one pool, and per J302-01 that ratio is the price. Holders reading a 5 percent discount as a market judgment on Lido were reading a statement about who had recently sold, which is a different fact, and the gap was not slippage, could not be reduced by any setting, and was already in the price before anybody submitted a transaction.
What you will be able to answer
- →What are the three separate costs in a swap?
- →What does a slippage tolerance do?
- →Why can you not use the constant product formula on a Curve pool?
- →What is the trade when choosing a tolerance?
Orientation and Year One are open: anyone can read them without an account. From Year Two onward the lessons are for enrolled learners, because progress through the later years only means anything if it is tracked against a record.
It is free. We do not sell the list and there is nothing to buy at the end of it.
Sources and review
- https://www.coindesk.com/business/2022/06/29/nansen-casts-blame-for-steth-de-peg-on-terra
- https://beincrypto.com/steth-depegs-whale-pulls-101m-eth-curve-finance/
- https://fortune.com/2022/06/17/steth-token-trading-pool-crypto-investors/
- https://blog.uniswap.org/minimize-slippage-on-swaps
Confidence high·Volatility medium·Reviewed 2026-08-06·Owner unassigned
Contested
Whether the stETH discount was purely a liquidity phenomenon or also reflected genuine doubt about withdrawal timing is contested and both were present. The lesson's claim is narrower and is not contested: the pool price is a function of the pool's reserves, so a skewed pool reports a discount whatever the market believes.
The constant product comparison in the worked example is a deliberate counterfactual to show what the stableswap invariant is doing. Curve did not use constant product for this pool and the 0.282 figure is not a price anybody was ever quoted.