According to a recent report from Dune, a significant portion of the liquidity that users contribute to decentralized exchanges isn’t actually used to speed up transactions.
To put things into perspective, concentrated liquidity was created to increase the capital efficiency of decentralized exchanges. This was done by allowing liquidity providers (LPs) to distribute funds within certain price ranges where trading is most likely to occur.
However, the study found that in the first half of 2026, an average of 29.4% of liquidity fell outside the scope of active trading. Thanks to the same, no trading fees were generated.
This amounted to approximately $542 million in unused capital per week and an estimated $150 million in lost annual fee revenue for liquidity providers across the four protocols.
For context, the four protocols included were Uniswap v3, Uniswap v4, PancakeSwap v3, and Aerodrome Slipstream.
Underutilized concentrated liquidity
Taking into account the technically available but never used liquidity, approximately 85% of the capital was underutilized.
The fact that more than $200 million of unused liquidity has not been repositioned in more than 90 days may be evidence that many LPs are not actively managing their assets.
This also suggested that while concentrated liquidity should increase efficiency, many LPs still find it difficult to keep their positions in line with market prices.
Individual investors suffered the most
Furthermore, the study found that automated managers maintained capital activity while individual investors held the majority of unused liquidity.
For example, wallets on Ethereum had 94% of idle capital and 91% of Uniswap v3 liquidity. 92% of unused liquidity and 78% of liquidity were under control on Arbitrum. On Base, individual users oversaw 82% of the idle capital, even though smart contracts held about 50% of the liquidity.
This is because only 6.5% of their positions were out of reach, compared to around 30% for wallets. This also indicated that automated managers have been much more successful than individual LPs in maintaining liquidity.
Additional loopholes
Finally, the study found that the inactive liquidity problem has not been solved by Uniswap v4.
Like Uniswap v3, about 30.5% of liquidity is still out of reach even after adding hooks that allow unused capital to be used in external return strategies.
Furthermore, only 10% of v4’s TVL actually uses hooks, with none of these currently generating returns from idle liquidity.
Final summary
- In the first half of 2026, approximately 29.5% of liquidity fell outside the scope of active trading.
- Instead of AMMs, individual investors held most of the unused liquidity.