Information
What Is Concentrated Liquidity in Uniswap?
Concentrated liquidity allows liquidity providers in certain Uniswap pool designs to allocate liquidity within a chosen price range. Understand the idea and the added management considerations.
Liquidity within a price range
Instead of spreading liquidity across every possible price, a provider can choose a range where their liquidity is active. This can use capital more selectively but changes how the position behaves.
When a position goes out of range
If the market price moves outside the selected range, a position may no longer contribute active liquidity in the same way and can become composed largely or entirely of one asset, depending on the pool mechanics.
Management and risk
Range selection, price movement, fees, rebalancing, gas costs, and smart-contract risk all matter. Concentrated liquidity can increase complexity and does not guarantee higher returns.
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