Uniswap V3’s concentrated liquidity positions are represented as NFTs, giving LPs unprecedented control over their capital efficiency. However, this power comes with complexity. Managing V3 positions effectively requires understanding range selection, rebalancing strategies, and fee optimization.
What Makes V3 Different
Unlike V2’s full-range liquidity, V3 lets you concentrate liquidity within specific price ranges:
- Higher capital efficiency: Up to 4000x more efficient than V2
- Custom ranges: Choose where your liquidity is active
- NFT representation: Each position is a unique, tradeable token
- Active management required: Positions need monitoring and adjustment
Range Selection Strategies
| Strategy | Range Width | Best For | Management |
|---|---|---|---|
| Tight Range | ±2-5% | Stablecoin pairs, high conviction | Active (daily) |
| Medium Range | ±10-25% | Correlated assets | Regular (weekly) |
| Wide Range | ±50%+ | Volatile pairs, passive approach | Minimal |
Key Takeaways
- V3 positions are NFTs with concentrated liquidity in custom ranges
- Tighter ranges = higher fees but more IL risk and management
- Use position managers for automated rebalancing
- Monitor positions regularly—out-of-range positions earn nothing
- Consider multiple positions at different ranges for diversification