Create slippage-protection.mdx #472
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Very good content for anyone to better understand the risks of CoW Protocol.
I'd say "Tutorials" isn't the best place where to put this, since it's not really a how-to guide. Maybe after 🐮 CoW Protocol -> Concepts -> How it works?
I also have a few inline comments.
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| ### The Risk Model | ||
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| Slippage protection in CoW Protocol is implemented through a combination of economic incentives, governance mechanisms, and technical safeguards: |
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This section reads weirdly to me:
Slippage protection [...] is implemented [...] by:
1. Having a bond (ok)
2. Allowing execution of orders at any signed price (what?)
3. Large orders are at risk (what?)
4. Security mechanisms (ok)
I'd try to separate the parts "what are the risks for the user, what the user should be careful about" and "what we do to mitigate those risks".
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Looking forward: it looks like the former is part of "Safe Usage Guidelines" and the latter is part of "Recommendations," with some repeating content. Maybe this section can be dropped?
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| 1. Manage slippage settings - Use reasonable slippage tolerances proportional to your trade size. | ||
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| 2. Break up large trades - Split substantial orders into smaller batches to ensure potential slippage remains below the solver bond value. |
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For clarity. Having 1 large order or 10 small orders that sum up to the same parameters of the large one is basically the same in terms of risks if they are all active at the same time.
| 2. Break up large trades - Split substantial orders into smaller batches to ensure potential slippage remains below the solver bond value. | |
| 2. Break up large trades - Execute substantial orders in smaller batches one after the other to ensure potential slippage remains below the solver bond value. |
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| If a trade involves selling 1,000 ETH, and the user sets a 1% slippage tolerance: | ||
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| - At an ETH price of $3,000, the total order value is $3,000,000 |
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$ something $ is interpreted as math and is displayed weirdly.
This appears to work for escaping it:
| - At an ETH price of $3,000, the total order value is $3,000,000 | |
| - At an ETH price of \$3,000, the total order value is \$3,000,000 |
You may want to use \$ instead of $ everywhere in the document to avoid missing it, but it's also ok to only fix the issue where it's encountered.
| 3. Risk awareness - For particularly large orders with high slippage tolerance, users should be aware that: | ||
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| - The potential value at risk is tied to both order size and slippage settings | ||
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| - Additional precautions become increasingly important as order values grow | ||
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| 5. Security layers - The protocol employs multiple protective mechanisms: |
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Note the skip between 3 and 5.
| 2. For developers: When building on CoW Protocol or implementing trading systems: | ||
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| - Implement additional validation logic for large trades | ||
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| - Consider custom slippage management for different token types and market conditions | ||
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| - Use TWAP for large order execution | ||
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| 4. For treasury managers: When setting up systems like Zodiac Role Modifiers: |
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Note the skip between 2 and 4.
Description
Create a new section for explaining the considerations around slippage management and accompanied risks
Changes
Add a new file with dedicated explanation