Pools
Providing Liquidity in Concentrated Liquidity Pools
Similar to other V3 like concentrated liquidity pools, liquidity positions are represented as an NFT. When liquidity is added to a pool, users will receive a NFT token and be able to claim their share of fees earned from the pool.
Please note that these NFTs are transferable, and represent ownership of the underlying assets and the trading fees earned.
In V3, trading fees don't automatically compound in the position. Users can manually claim them from each of the positions.
Users can redeem their funds any time by withdrawing the liquidity.
Active liquidity and price ranges
In V3, liquidity providers (LPs) specify a price range within which their capital is active.
A position only provides liquidity when the market price is within the configured range.
If the price moves outside the range, the position becomes inactive.
When inactive, the position holds 100% of one token in the pair (depending on which side price exited).
Inactive positions:
Do not participate in swaps
Do not earn trading fees
This design allows capital to be deployed more precisely around expected trading prices.
Trading fees
LPs earn fees when traders use their liquidity.
For each swap:
Traders pay a fee based on the pool’s fee tier
Fee tiers typically range from 0.01% to 1%
Fees are collected per swap hop (each pool involved in a routed trade)
Fees are distributed proportionally to active liquidity providers in the pool at the time of the swap.
Inactive liquidity does not earn fees. Their fee rates and fee breakdowns are shown as follows:
Liquidity Provider
80%
80%
80%
80%
85%
Protocol Fees
20%
20%
20%
20%
15%
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