# Concentrated Liquidity **Concentrated Liquidity (CLMM)** allows liquidity providers (LPs) to provide liquidity within chosen price range instead of spreading capital across the full price curve like a Constant Product Market Makers (CPMM). This focused design keeps liquidity where trades happen most, improving capital efficiency and fee earnings while giving traders tighter spreads and better prices. Unlike continuous pricing, concentrated liquidity (CLMM) utilize **discrete price ticks** (each tick = 0.0001% move) to cluster liquidity around active price levels. Liquidity providers can change their ranges at any time to follow market trends, ensuring their capital works where it’s most effective. * **Lower fee tiers:** tighter tick spacing, ideal for stable pairs * **Higher fee tiers:** wider spacing, better for volatile assets ### Active vs Inactive Liquidity In Byreal’s concentrated liquidity, your liquidity positions shift between **Active** and **Inactive** states based on where the market price sits relative to your range: * **Active:**\ When the price is **inside** your range, your liquidity is used for swaps and earns trading fees and incentive rewards. * **Inactive:**\ If the price moves **outside** your range, your liquidity stops earning. The token ratio adjusts naturally based on price movement, and your position reactivates automatically when the market re-enters the range. ### Range Width Matters A **narrower range** concentrates your liquidity more tightly, which means you earn a **higher share of trading fees and incentives.** However, it also increases the risk of the price moving outside your range — which means your position can become inactive more easily and may experience greater impermanent loss. A wider range lowers this risk and keeps your position active for longer, but spreads your capital thinner, so your share of rewards is lower. > **Tip:** Many liquidity providers use a mix of narrow and wide ranges across multiple positions to balance higher yield opportunities with more stable, long-term returns. --- # Agent Instructions: Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. Perform an HTTP GET request on the current page URL with the `ask` query parameter: ``` GET https://docs.byreal.io/resources/knowledge/concentrated-liquidity.md?ask= ``` The question should be specific, self-contained, and written in natural language. The response will contain a direct answer to the question and relevant excerpts and sources from the documentation. Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.