A superior Market Maker- CLMM

CLMM ( Concentrated Liquidity Market Maker) is a different type of liquidity pool. I will be explaining its importance and why it is the future of liquidity pools.

We have probably heard about AMM- Automatic Market Maker, which was first used by Uniswap v2, before other DEX copied it. 

AMM is a liquidity model that spreads liquidity across 0 and infinity, which kind of makes it impossible for all the liquidity to be fully utilized. In a case of a stable pair, where the price doesn't fall out of 0.98 - 1.01, most part of the liquidity in a stable pair isn't being used in an AMM. 

Due to this shortcoming of the AMM liquidity pool, something superior had to be created with more efficiency. CLMM was created to replace AMM.

Concentrated liquidity is simply concentrating liquidity between a specific price range rather than spreading it across 0 and infinity. Now, concentrating the liquidity within a specific price range which in most cases is around the market price, makes the liquidity concentrated and more effective.

CLMM provides more liquidity depth and makes liquidity more efficient and effective. Unlike in AMM where a liquidity position is represented by a token, in CLMM, a liquidity position is represented by an NFT.

Also, fees earned from adding liquidity on a CLMM pool can be claimed independently without having to unstake the liquidity position.

You can read more on CLMM on the web, to have an in-depth knowledge of the principles of CLMM