When you hear concentrated liquidity, a method where liquidity providers assign funds to specific price ranges instead of across an entire curve. Also known as smart liquidity, it’s the engine behind modern decentralized exchanges like Uniswap V3 and has rewritten the rules of DeFi. Before concentrated liquidity, liquidity providers had to spread their funds across every possible price point — a wasteful approach that diluted returns and exposed capital to unnecessary risk. Now, you choose exactly where your money works. If you believe ETH will trade between $3,000 and $3,500 this week, you put all your liquidity there. No fluff. No wasted capital. That’s the power of this system.
This shift didn’t just make trading more efficient — it changed who could profit. Before, only big players with massive capital could earn meaningful fees from automated market makers (AMMs). Now, even small providers can compete by targeting high-volume price zones. Concentrated liquidity turns liquidity provision from a passive, low-yield activity into an active, strategic one. It’s no longer about having the most tokens — it’s about knowing where the market moves. And that’s why you see so many posts here about Uniswap V3, the first major DEX to implement concentrated liquidity and now the standard for DeFi liquidity protocols, and why others like AMM, automated market makers that use algorithms to set prices without order books are being rebuilt around it. You’ll also find posts about liquidity mining, impermanent loss, and how to avoid getting wiped out when prices move outside your range — all direct consequences of this new model.
But concentrated liquidity isn’t magic. It demands attention. If you set your range too narrow and the price moves, your funds stop earning fees. Too wide, and you’re back to the old, inefficient way. It’s a balancing act between risk and reward. That’s why the posts here cover real cases — from traders who doubled their returns by locking liquidity around key support levels, to those who lost everything because they ignored volatility. You’ll see how it ties into liquidity provision, the act of supplying assets to a DeFi pool to earn trading fees, and why some platforms now reward providers with extra incentives just for staying within range. This isn’t theory. It’s what’s happening right now in DeFi — and if you’re trading or providing liquidity, you need to understand it.
Sushiswap v3 on Ethereum offers concentrated liquidity, on-chain limit orders, and DCA features for active traders. Learn how it compares to Uniswap, where it shines, and the risks you need to know before using it.
Read More