A recent analysis by Dune indicates that approximately 85% of concentrated liquidity on decentralized exchanges (DEXs) goes unutilized, limiting the intended capital efficiency benefits for liquidity providers (LPs).

Idle Capital and Fee Losses Identified

Concentrated liquidity allows LPs to allocate funds within specific price bands expected to see the highest trading volume, theoretically boosting capital efficiency. However, the report shows that in the first half of 2026, an average of 29.4% of liquidity remained outside active trading ranges, generating no trading fees.

This idle capital equated to roughly $542 million on a weekly basis across four major protocols: Uniswap v3, Uniswap v4, PancakeSwap v3, and Aerodrome Slipstream. Annually, liquidity providers missed out on estimated fee revenue of $150 million due to this underutilization.

the report highlights that more than $200 million in liquidity stayed inactive for over 90 days, implying that many LPs do not actively manage or reposition their holdings according to market movements.

Automated Managers vs. Individual Investors

According to the study, automated liquidity managers were more effective at maintaining active capital compared to individual investors, who held the majority of idle liquidity. On Ethereum, wallets accounted for 94% of idle capital and 91% of Uniswap v3 liquidity. Similarly, on Arbitrum, individual investors controlled 92% of idle liquidity and 78% of total liquidity.

In comparison, smart contracts managed about half of the liquidity on the Base network but only 82% of the idle capital. Automated managers had just 6.5% of positions out of range, while wallet-controlled liquidity was approximately 30% out of range. This contrast suggests a gap in management capability between automated systems and solo LPs.

Despite Uniswap v4 introducing hooks intended to activate idle capital through external yield strategies, around 30.5% of its liquidity remains out of the active range. plus only 10% of Uniswap v4’s total value locked (TVL) utilizes hooks, none of which currently generate yield from idle liquidity.

This report underlines the persistent challenges facing liquidity providers in optimizing capital use on decentralized exchanges.