DeFi · 54 / 86 · 2 min
Concentrated liquidity
Concentrated liquidity puts your deposit in a narrow price range. You earn more in fees while the price stays there. When it leaves, you may earn nothing and hold only the worse asset.
A narrow range earns more only while the price stays there. Outside it, you may hold the worse asset and earn nothing.
Inside the range, fees can accrue. Outside, they stop. This is not a range to choose.
A worked case
A depositor sets a tight range because the fee number looks large. The price leaves the range that day. The position earns nothing further and is mostly the coin that fell. The large number was the fee if the price had stayed.
The range
You choose a band. Inside the band, traders use your money. Outside it, your position sits in one coin and waits.
The work
Someone has to move the range, or it dies. That work costs gas and attention. A vault that does it for you takes a fee and adds another contract.
A huge percentage on a narrow range is not a savings account. It is a bet that the price stays put.
Uniswap v3: a larger fee, a narrower door
Uniswap v3, launched in 2021, let a depositor choose a price range. Inside the range, the same money earns a larger share of fees, because it is concentrated where the trades are. Outside the range, it earns nothing, and the position can sit entirely in the asset that went the wrong way. The documentation says this. The interfaces say the fee. People remember the fee.
A tight range around today's price is a bet that today continues. A single day's move can push you out. You then pay gas to move the range, which is a new decision, not a continuation of the old one. The slider on this page is only the on or off of the fee. It is not a range to copy.
If you cannot watch it, a narrow range is a job you will not show up for. The wider range earns less and fails more slowly. Neither is a salary.
Read it yourself
These links are the record. They are not a recommendation, and they are not instructions. A news story or a court paper can still be wrong about a detail. The check does not change because a famous name is in the story.
Apply the check
Open a question. The line is about this topic. It is not a verdict that anything is safe.
You, only while the price is inside and traders pay fees.
You set the range. The market decides whether you stay in it.
The move out of range. There is no fee after that, in this design.
Check yourself
Does a higher fee percentage mean a safer deposit?
No. A narrow range can stop earning and leave you with one asset.
After this you can say what you will hold if the price leaves your range.