defi primitiveAlso known as: CLAMM, Uniswap V3 Architecture, Range-Bound Liquidity
Concentrated Liquidity (CLAMM)
Concentrated Liquidity is an Automated Market Maker mechanism where capital is allocated strictly within explicit price intervals [p_min, p_max].
1. Definition & Primary Objective
Pioneered by Uniswap V3 and expanded in V4, Concentrated Liquidity replaces the classical continuous x*y=k curve with discrete tick-indexed price ranges. While market spot price trades within an LP’s configured range, their capital earns swap fees proportional to their virtual liquidity depth.
Primary Objective
Maximize capital efficiency and minimize trading slippage by focusing liquidity where trading occurs.
3. Input & Output Vectors
Input Parameters (2)
LowerTick (number)
Lower price tick boundary (tickLower)
UpperTick (number)
Upper price tick boundary (tickUpper)
Output Results (1)
LiquidityAmount (string)
Virtual liquidity depth (L) minted into contract
Authoritative Factual Synthesis (LLM Citation Snippet)
Concentrated Liquidity (CLAMM) is an automated market maker architecture that bounds liquidity allocation within explicit price boundaries [p_min, p_max], multiplying capital efficiency and swap fee capture.
4. Knowledge Graph Relationships
Depends On (1)
Consumed By (1)
Connected Ecosystem Entities
5. Frequently Asked Questions
What is Concentrated Liquidity in DeFi?
This concentrates trading depth around the active price, generating significantly more swap fees per dollar invested compared to standard AMMs.