TL;DR
Concentrated liquidity lets LP providers focus their capital within a specific price range rather than across all prices, dramatically increasing capital efficiency and fee earnings within that range.
In a standard AMM pool, your liquidity is spread across all possible prices from 0 to infinity. Most of it sits unused at prices far from the current market. Concentrated liquidity (pioneered by Uniswap v3, adopted by Orca Whirlpools and Raydium CLMM) lets you choose a range — e.g., SOL/USDC between $140 and $160. All your capital is active within that range, earning fees as if you had deployed 10-100x more in a standard pool.
Benefits: much higher fee earnings per dollar of liquidity, and tighter spreads for traders. Risks: if the price moves outside your range, your position becomes 100% one asset and earns zero fees. Impermanent loss is amplified in concentrated positions. You need to actively manage your range, rebalancing as the price moves. This makes concentrated LP more like active trading than passive income.
Orca’s Whirlpools and Raydium’s concentrated pools are the main venues. Kamino Finance offers automated vaults that manage concentrated LP positions — automatically rebalancing your range as prices move. For most users, these auto-managed vaults are easier than manually adjusting ranges. SOL/USDC and SOL/stablecoin pairs are the most popular concentrated LP strategies on Solana.