# CLMM (Concentrated)
## Overview
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
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
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
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
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
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
[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
* **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
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 |
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