Concentrated Liquidity Explained in Detail
Concentrated liquidity lets liquidity providers choose a price range where their liquidity is active. If the market price leaves that range, the position may hold only one asset and stop providing active liquidity.
This model is more capital efficient, but its accounting is more complex than simple pool shares.
Smart contract example
active liquidity depends on current tick and position range
Tick movement changes which positions are active.
Concentrated Liquidity in Auditing
Protocols may value concentrated-liquidity positions as collateral or strategy assets. That valuation can be wrong if it ignores ticks, range state, fees, or manipulation.
Auditors check position accounting, fee growth, price ranges, and oracle assumptions.
Red flags in code
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Pool TVL is treated as usable liquidity at every price.
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Position valuation ignores whether the position is in range.
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Fee growth math is wrong around tick crossings.
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NFT LP positions are valued from manipulable spot state.
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Rounding errors appear near range boundaries.
How to test or review it
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Move price across ticks and range boundaries.
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Test in-range, out-of-range, and edge-of-range positions.
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Fuzz add, remove, collect, and rebalance flows.
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Check fee accounting after repeated swaps.
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Review oracle design for manipulation resistance.