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Lidian enables zero slippage by default for all movements. The term zero slippage means that the price and amounts offered by the liquidity provider (a.k.a the buyer) in all cases is guaranteed through execution. This differs from many bridges, decentralized finance (DeFi) protocols, and intent networks that utilize dynamic slippage often times to the tune of 50 to 200 basis points.

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Why does slippage occur?

Slippage can occur for a number of reasons. The most common are a combination of the protocol algorithms and liquidity as well as maximal extractable value (MEV) which allows transactions to be re-ordered for profitability. Slippage allows protocols to force users into agreeing to execute at whatever price the market allows them to fall into during execution which is somewhere between the target amount and the minimum output.

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Algorithms and Liquidity

Starting simple, it’s actually quite common for entites to utilize protocols like Uniswap to move between popular stablecoins. However, with the default slippage often set to 50 basis points it’s common for execution to settle closer to the minimum amount out as opposed to the target. Lack of liquidity is one common reason for slippage. Due to the algorithms used in automated market makers (AMMs), it’s common that large trades (which is subjective) but generally anything that starts to move percentage points of a pool can result in executing at that worse price.

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MEV

A more hidden impact on execution price is maximal extractable value (MEV). Often times an unknown factor, MEV occurs when those building the chain: searchers, block builders, validators, etc as well as MEV Bots who spam the chain with transactions to arbitrage and do other nefarious actions (in some cases) reorder or insert transactions to be more profitable. Example. You want to move $1000 USDC -> USDT. A searcher sees this transaction in the mempool and creates buy and sell orders that they insert your transaction in between. This causes you to buy at a worse price, which is that slippage piece, why they make a profit by selling at the new higher price.

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Lidian’s Solution

Lidian solves this with deterministic quoting. When an intent is created it is sent out to Lidian for a quote. The quote is the equivalent of a binding agreement (on execution price) between the liquidity provider and the money mover. Once a quote is signed is signed it has a time to life (TTL). If it is accepted and signed by the money mover within an appropriate amount of time (defined by the liquidity provider) the outcome is guaranteed by the money mover. This allows money movers to know exactly what they are getting before they agree to sell their stablecoins.