Stage 3 · Using Arc · Lesson 14
Swaps and slippage, with coffee
How a DEX swap actually works, what slippage is (explained with a coffee stand), why price impact punishes big orders in small pools, and the settings that protect you.
A swap is trading one token for another — USDC for some project's token, say — on a DEX like Uniswap or Aerodrome, both live on Arc. No signup, no order book: you trade against a pool of both tokens supplied by other users, and an algorithm prices the trade by the pool's balance. That one design fact explains everything confusing about swaps.
Slippage, via the coffee stand
Imagine a tiny stand with 10 coffees and $10. Buy one coffee and the algorithm reprices: coffee is now scarcer, so the next costs more. Try to buy five and each successive one costs more than the last — your average price slips away from the quoted one. That is slippage: the gap between the price you saw and the price you get, and it grows with your order size relative to the pool. A $100 swap in a deep USDC pool slips imperceptibly; the same $100 in a brand-new token's shallow pool can slip badly. This is also price impact — in small pools, your own trade moves the market against you.
The slippage tolerance setting
It is you telling the DEX to cancel if the price moves more than X% against you between quote and execution. Too tight and busy-market trades fail, a small fee lost and funds safe; too loose and you have authorised a terrible fill — and on volatile new tokens, predatory bots exist specifically to exploit loose tolerances. Sane defaults: around 0.5% for deep pairs, and if a trade requires double-digit tolerance to go through, the pool is telling you it is too shallow to trade at your size. Believe it.
The pre-swap checklist
- Confirm the token's contract address from the project's official source. Tickers are costumes, and fake tokens with real names are a standard scam pattern.
- Glance at the pool's depth and the token page on Arcscan.
- Start small on anything new.
- Check whether the pool's liquidity is locked, so the team cannot yank it — the structural check that outranks all the others.
Mechanically, on Arc: approve the token with exact amounts, swap, settled in under a second for under a cent. The mechanics are the easy part. The judgment is the lesson.
