Plain English
Concentrated liquidity is a Uniswap V3 innovation: LPs choose a price range to provide liquidity within, instead of spreading it across the entire 0-to-infinity curve. Inside your range, you earn fees at much higher capital efficiency. Outside it, your liquidity sits idle — and you absorb 100% of the impermanent loss.
How it actually works
You pick a lower and upper price; deposit a token pair scaled to that range; receive a unique LP NFT. The pool routes fees from any swap within your range proportionally to LP shares active there. Move outside the range and your position becomes 100% the asset that fell out of favor — and you earn nothing until price comes back.
What it means for you
Concentrated LP is materially more complex than V2 LP. Done well (correlated pairs, tight ranges, active management), it produces strong fee yields. Done badly (volatile pair, set-and-forget), it amplifies losses. For HNW positions, concentrated LP is best paired with managed strategies (Arrakis, Gamma, ICHI) rather than DIY.
Will this information be valuable to you?
Already a member? Send this term to your coach inside the community and tell them exactly what you need help with — we will build a plan around it.
New here? Join the membership, become a student, or sit in on the community. Your starting point is one short call.
Educational content only. Not investment, tax, or legal advice.