Concentrated Liquidity

Concentrated liquidity is an automated market maker design in which a liquidity provider chooses the price range their capital supplies, instead of spreading it across every possible price. Inside the chosen range the position behaves like a much deeper pool, so it earns a larger share of trading fees for the same capital. Outside the range it earns nothing at all and ends up entirely converted into whichever of the two assets the market has moved away from. It concentrates the fee income and the impermanent loss together, which makes it an active position that needs monitoring rather than a deposit that can be left alone.