# CLMM (Concentrated)

## Overview <a href="#overview" id="overview"></a>

Concentrated liquidity allows liquidity providers (LPs) to allocate capital within a **specific price range** rather than across the entire curve. This can significantly increase capital efficiency, but it also introduces **active management requirements** and additional risk.

Impermanent loss can be significant in CLMM pools. A positive return is not guaranteed. Make sure you understand the risks before providing concentrated liquidity.

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## Creating pools <a href="#creating-pools" id="creating-pools"></a>

Only **one pool can exist per token pair per fee tier**.

Creating a pool sets initial price. Opening a position opens your **first liquidity position**.

**Costs**

[Pool creation costs](https://docs.raydium.io/raydium/for-liquidity-providers/pool-fees) approximately **0.06 SOL**, plus **position costs** that vary based on the selected price range.

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## Fee tiers and tick spacing <a href="#fee-tiers-and-tick-spacing" id="fee-tiers-and-tick-spacing"></a>

Lower fee tiers generally suit **stable or pegged assets**, where tighter spreads attract more volume. Higher fee tiers compensate LPs for the added risk of **volatile or exotic pairs**.

Each fee tier has a corresponding **tick spacing**:

* Lower fee tiers use smaller tick spacing for more granular price points
* Higher fee tiers use larger tick spacing with coarser price points

## **Fee split**

Liquidity providers earn **84%** of trading fees. The remaining **16%** is allocated to:

* **12%** to RAY buybacks
* **4%** to treasury

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## Positions <a href="#positions" id="positions"></a>

Each CLMM position is represented by an **NFT minted to your wallet**. This NFT controls ownership of:

* the liquidity in the position
* any uncollected fees and rewards

**Position NFT behavior**

If a position NFT is **lost, sold, or burned**, the liquidity it represents is also lost.

**Multiple positions**

There is no limit on the number of positions per wallet. You can open multiple positions in the same pool with overlapping or different ranges. Each position is independent.

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## Out-of-range positions <a href="#out-of-range-positions" id="out-of-range-positions"></a>

When the pool price moves outside your position’s configured range:

* you stop earning fees and farm rewards
* your position becomes **100% one-sided** (entirely token A or entirely token B)
* the position remains open (there is no auto-close mechanism)
* earnings resume automatically if the price returns to your range

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## Fees <a href="#fees" id="fees"></a>

Trading fees accrue to your position, but they are **not auto-compounded**. They accumulate inside the position until you trigger a collection event.

#### **Collecting fees**

Fees are accounted for whenever you modify liquidity, but they are only **transferred to your wallet** when you:

* remove any amount of liquidity from the position, or
* call `decrease_liquidity` with **0 liquidity** (claim fees only)

There is no separate “claim fees” instruction. Fee collection is handled through `decrease_liquidity`.

Increasing liquidity updates fee accounting but does **not** transfer fees to you.

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## Rewards <a href="#rewards" id="rewards"></a>

[Farming rewards](https://docs.raydium.io/raydium/liquidity-tools/ecosystem-farms) (if enabled) behave similarly to fees.

**Earning requirements**

* your position must be **in-range** to earn rewards
* rewards are proportional to your liquidity within the active range
* out-of-range positions earn nothing until the price returns in-range

**Collecting rewards**

Rewards are collected automatically when you modify your position’s liquidity (including a `decrease_liquidity` of 0).

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## Key concepts <a href="#key-concepts" id="key-concepts"></a>

* **Price range**: the minimum and maximum prices where your liquidity is active. Tighter ranges can earn more when in-range, but go out-of-range more easily.
* **Quote token convention**: the quote token represents how many quote tokens are needed to purchase 1 base token. Common quote tokens include SOL and USDC.
* **Starting price**: set during pool creation and defines the initial exchange rate (quote per base).

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## Summary <a href="#summary" id="summary"></a>

CLMM improves capital efficiency by letting LPs concentrate liquidity in a chosen price range. In return, LPs take on more complexity and risk, including the possibility of going out-of-range and becoming one-sided.

Fees and rewards accrue to positions over time, but they are only transferred to your wallet when you reduce liquidity (including a 0-liquidity decrease to claim).

| Feature         | Behavior                                        |
| --------------- | ----------------------------------------------- |
| Fee accrual     | Manual claim (collected with liquidity changes) |
| Position NFT    | Transferable; new owner controls position       |
| Tick spacing    | Tied to fee tier                                |
| Out-of-range    | Stop earning, no auto-close                     |
| Position limits | None; overlapping ranges allowed                |