What is concentrated liquidity?

A classic constant-product pool spreads liquidity across every price from zero to infinity, so most of it sits at prices the market will never visit. Uniswap v3 changed that in May 2021. Providers pick a range, say $140 to $160 for SOL, and all of their capital works there. On Solana, Raydium's CLMM pools and Orca's Whirlpools use the same idea.

The payoff is capital efficiency. A tight position can earn the same fees as a much bigger full-range one. But only while the price stays inside. Once it leaves, the position stops earning and turns entirely into one token of the pair, and it is always the one that lost value against the other.

So this is an active strategy, whatever the marketing says. Narrow ranges pay more and need frequent rebalancing, and every rebalance costs fees and locks in impermanent loss. Wide ranges behave more like a normal pool. Plenty of providers hand the job to a vault or an automated manager.

Suppose you provide SOL-USDC liquidity between $140 and $160, and SOL runs to $170. Your position is now all USDC. It earns nothing until SOL comes back into range, and just holding SOL would have done better.

Also called: CLMM, concentrated liquidity market maker, range liquidity.

Raydium pools has a CLMM filter for concentrated pools and sorts them by volume, TVL or APR, with 24-hour and 7-day APR side by side. Cashboard does not track your LP ranges or calculate impermanent loss.

• Raydium pools

• Official documentationdevelopers.uniswap.org

• Liquidity pool
• Impermanent loss
• Automated market maker
• Yield farming