How Do Concentrated Liquidity Pools Aim to Improve the Spread on DEXs?

Concentrated liquidity pools allow liquidity providers (LPs) to allocate their capital within a specific, narrow price range instead of across the entire price spectrum. This concentrates the available liquidity near the current market price, mimicking the depth of a traditional order book.

By having more capital available at the best bid and offer, these pools significantly reduce price impact and result in a much tighter, more efficient bid-offer spread.