A third of DEX liquidity earns nothing

Concentrated liquidity was supposed to be the fix for capital efficiency on decentralized exchanges. A new study suggests the job is only half done.

New research from onchain analytics platform @Dune, commissioned by 1inch, found that 85% of concentrated liquidity on decentralized exchanges, roughly $1.6 billion out of $1.84 billion tracked, is underutilized at any given time. Of that, about $542 million sits completely idle in an average week, earning nothing and providing no market depth whatsoever.

The Scope of the Problem

@Dune tracked four major concentrated-liquidity platforms, @Uniswap v3 and v4, @PancakeSwap v3, and @AerodromeFi Slipstream, across seven blockchains, taking weekly snapshots between January 6 and June 30, 2026. The study covered the top 200 pools by trading volume on each platform, holding that group fixed across all 26 weeks to give a consistent panel averaging $1.84 billion in tracked capital.

Across the 26 weeks tracked, an average of 29.5% of liquidity sat in a fully idle state, spiking to around 41% in early February. In DeFi, liquidity providers deposit funds into a price range where they expect trading to happen, earning fees whenever a trade occurs within that range. When the market price moves outside that range, the deposited funds stop earning anything, simply sitting there until the price moves back or the provider adjusts their position.

The research also found that idle capital is overwhelmingly held by individual wallets rather than automated systems. On @Uniswap v3, individual wallets accounted for 82% to 94% of idle dollars across the chains studied, while capital managed by contract-based systems and active market makers stayed in range far more reliably. That pattern points to a straightforward behavioral problem: retail providers set a range and walk away.

The cost of that inaction is significant. Idle liquidity providers gave up roughly $150 million in annualized fees, according to the original research. That figure sits alongside a broader structural irony: concentrated liquidity was designed to be more efficient than the older v2 model, where 99% of capital went unused. It is, but not by enough to eliminate the problem.

Newer Designs Have Not Solved It

No single platform design avoided the problem. Comparing the same trading pairs across different venues, idle rates shifted from pair to pair rather than favoring one protocol over another. Even @Uniswap v4, the newest of the platforms studied, showed idle rates around 30%, similar to its predecessor. Even stablecoin pools, where prices are expected to stay stable, saw roughly 30% idle rates, since liquidity providers tend to concentrate their funds into extremely narrow ranges.

1inch is not a neutral observer here. 1inch plans to launch a product called Aqua aimed at helping liquidity providers maximize their capital. Aqua introduces a shared liquidity layer where liquidity providers allocate virtual balances that can be deployed across multiple trading strategies with a single token approval. Rather than committing capital to one static pool, a provider's allocated balance can be matched dynamically to whichever strategy offers the most efficient use at any given moment.

"Due to structural inefficiencies in DeFi, liquidity providers are leaving billions of dollars in underutilized capital and millions of dollars in fees on the table," said Sergej Kunz, Co-Founder of 1inch. "If the industry is serious about bringing TradFi's trillions onchain, solving this needs to be priority number one."

Sources
TheStreet Crypto: New research finds $1.6 billion in DeFi liquidity sitting unused
1inch Aqua White Paper (official)