> For the complete documentation index, see [llms.txt](https://capricorn-docs.gitbook.io/capricorn-docs/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://capricorn-docs.gitbook.io/capricorn-docs/capricorn-exchange/pools.md).

# Pools

#### Providing Liquidity in Concentrated Liquidity Pools <a href="#id-03e94594-5a75-4687-b260-0dc69574b953" id="id-03e94594-5a75-4687-b260-0dc69574b953"></a>

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:

<table><thead><tr><th width="165.84375">Fee Tier</th><th width="115.78515625">0.01%</th><th width="107.71875">0.05%</th><th width="107.3828125">0.15%</th><th width="111.26171875">0.30%</th><th width="112.203125">1.00%</th></tr></thead><tbody><tr><td><strong>Liquidity Provider</strong></td><td>80%</td><td>80%</td><td>80%</td><td>80%</td><td>85%</td></tr><tr><td><strong>Protocol Fees</strong></td><td>20%</td><td>20%</td><td>20%</td><td>20%</td><td>15%</td></tr></tbody></table>