Explain the Function of a ‘Concentrated Liquidity’ AMM

A Concentrated Liquidity AMM (CLAMM) allows Liquidity Providers (LPs) to allocate their capital within specific, narrow price ranges instead of across the entire 0 to infinity range. This focuses the liquidity where most trading occurs, resulting in much deeper market depth and significantly lower slippage for trades within that range.

It allows LPs to earn higher fees on their capital but introduces the need for active management to re-range their position.