Concentrated Liquidity
A concentrated-liquidity position allocates capital to a chosen price interval instead of the full price curve. Within that interval the position works harder; outside it, the position rests and earns nothing.
Each position is represented by an ERC-721 NFT that records its pool, range and liquidity.
Price ranges
- In range: both assets may be present and the position can earn fees from swaps crossing its active liquidity.
- Below range: the position is effectively held in one asset.
- Above range: the position is effectively held in the other asset.
The exact asset orientation depends on token ordering and the quoted price convention.
Tick spacing
Ticks are discrete price boundaries. Tick spacing controls which boundaries a pool can use: smaller spacing permits finer ranges, while wider spacing reduces the number of initialized boundaries and can suit more volatile assets.
Do not infer risk from tick spacing alone. Fee settings, liquidity distribution and token behaviour matter just as much.
Position workflow
- Choose the correct concentrated pool.
- Select a lower and upper price.
- Review whether the current price is inside the range.
- Approve both tokens.
- Mint the NFT position.
- If a compatible gauge exists, stake the NFT to earn emissions.
- Monitor the range, and rebalance only after considering fees, price exposure and gas.
The key trade-off
A narrow range earns more fees per unit of capital while active, but it leaves range sooner and demands more management. A wide range is less capital-efficient but generally remains active across larger price moves. Neither is superior; they are different instruments for different convictions about where price will travel.
Check whether it is staked and whether pending fees or rewards need to be collected. Transferring the NFT transfers the position and everything attached to it.