Multi-hop swap(Slipless swap) is a type of trade that involves multiple token swaps to convert one cryptocurrency into another. It allows users to exchange tokens that do not have a direct trading market on a particular DEX by creating a series of intermediate trades. For example, suppose you want to trade token A for token D on a DEX, but there is no direct trading market between A and D. In that case, you can use a multi-hop swap to make the trade. You would first swap A for B, then swap B for C, and finally, swap C for D. The advantage of multi-hop swap is that they provide greater liquidity and more trading options to users by allowing for trades between tokens that may not have a direct swap route.
Multi-hop swaps epitomize how leveraging the modularity of sequential swaps can augment functionality. It's noteworthy that exchanges which solely rely on batch matching can encounter difficulties when managing multi-hop swaps. This is largely due to the complex nature of modularizing token swaps.
To illustrate, consider a scenario where an exchange processes a multi-hop swap A→B→C and subsequently receives a request for a multi-hop swap B→C→D. In this situation, attempting to swap B→C is problematic because the batch matching process has already taken place for the B→C swap. Even if it were possible to do the B→C swap again in the second multi-hop swap(B→C→D), it would be at the expense of liquidity compared to the B→C swap from the first multi-hop swap(A→B→C), which does not increase user convenience and creates equity issues.