​

Positions

In V3, each liquidity position is represented by a non-fungible token (ERC-721 NFT). Unlike V2’s fungible LP tokens, each V3 position is unique because it encodes a specific price range and liquidity amount.

​

Position Properties

Each position NFT stores:

​

Position Lifecycle

​

1. Mint (Create)

Create a new position by calling the Position Manager with:

• Token pair and fee tier (identifies the pool)
• Tick range (tickLower, tickUpper)
• Desired token amounts

The Position Manager mints an NFT and returns the tokenId.

​

2. Increase Liquidity

Add more liquidity to an existing position without changing the range. The additional tokens must match the current price ratio within your range.

​

3. Decrease Liquidity

Remove some or all liquidity from a position. This converts liquidity back to tokens, which are held by the Position Manager until collected.

​

4. Collect Fees

Claim accumulated trading fees. Fees accrue in the exact tokens of the pool and must be explicitly collected — they do not auto-compound like V2.

​

5. Burn

After removing all liquidity and collecting all fees, the NFT can be burned. This is optional — an empty position NFT has no economic value.

​

Position States

A position can be in one of three states depending on the current pool price:

​

Fee Calculation

Fees earned by a position are proportional to:

1. Liquidity share — The position’s liquidity relative to the total active liquidity at each tick
2. Time in range — Fees only accrue when the position is in range
3. Trading volume — More trades through the position’s range means more fees

$$\text{Fees earned} \propto \frac{L_{\text{position}}}{L_{\text{total at tick}}} \times \text{Volume through ticks}$$

​

Key Differences from V2