Concentrated liquidity is an AMM model introduced by Uniswap v3 and adopted by Solana DEXs including Orca (Whirlpools) and Meteora (DLMM). Unlike traditional AMMs where liquidity is spread across all possible prices, concentrated liquidity allows providers to specify a price range for their capital.

By concentrating liquidity in a narrow range around the current price, providers can earn significantly more trading fees per unit of capital compared to full-range liquidity provision. The trade-off is greater impermanent loss risk if the price moves outside the range.

Concentrated liquidity positions are often represented as non-fungible position tokens rather than fungible LP tokens, as each position has unique parameters.