Ticks

To achieve concentrated liquidity, the continuous spectrum of price space has been divided into segments called ticks. Each tick represents a 0.01% change in price. When creating a position, liquidity providers (LPs) select the lower and upper ticks to define their position's range.

As the spot price changes during swapping, the pool contract uses all the liquidity within the current tick interval until the next tick is reached. At that point, the contract switches to the new tick, activating any liquidity within that range. The number of ticks in each pool is the same, but only a portion can be active at a time. Tick spacing is related to swap fees—lower fees allow closer tick spacing, while higher fees allow wider spacing.

Crossing an active tick during a swap increases transaction costs as it activates new liquidity positions. In stablecoin pairs, narrower tick spacing improves capital efficiency, reduces price impact, and results in better prices for swaps.