How Does Capital Efficiency Differ between a Standard AMM and a Concentrated Liquidity Pool?

Capital efficiency is significantly higher in a concentrated liquidity pool (CLP). In a standard AMM, capital is spread across the entire 0 to infinity price curve, meaning a large portion of the capital is inactive at any given time.

A CLP allows LPs to concentrate their capital into the most active trading range. This means the same amount of capital can facilitate a much larger volume of trades, generating higher fees and thus being more capital efficient than a standard AMM.