TL;DR
Raydium’s AMM uses the classic constant-product formula with liquidity spread across all prices, while CLMM (Concentrated Liquidity Market Maker) lets LPs focus capital in specific price ranges for higher fee efficiency. Note: Raydium’s “CPMM” program is a constant-product pool, not a concentrated one.
Raydium’s original AMM pools use the constant product formula (x × y = k), the same model as Uniswap V2. Liquidity is distributed evenly across all prices from zero to infinity. This means most of your capital sits idle in price ranges that never get traded. It’s simple — deposit both tokens in equal value and forget about it — but capital-inefficient. You earn fees on the full deposit, but relative to what’s actually being utilized, the yield is diluted.
Raydium’s CLMM pools (Concentrated Liquidity Market Maker) allow LPs to specify a price range where their liquidity is active. For example, you might provide SOL/USDC liquidity only between $120 and $180. All your capital is concentrated in that range, meaning you earn far more fees per dollar deposited when the price stays within it. This is similar to Uniswap V3 on Ethereum and Orca’s Whirlpools on Solana.
Standard AMM (including Raydium’s newer CPMM program, which is also constant-product): zero management needed, works at any price, but lower capital efficiency and diluted fee income. CLMM: much higher fee APR within your range, but if the price moves outside your range you earn nothing and face amplified impermanent loss. CLMM requires active management — monitoring your range and repositioning when prices drift. For stable pairs (USDC/USDT), concentrated liquidity is almost always better. For volatile pairs, standard AMM may be safer for passive LPs.
If you want set-and-forget simplicity, use standard AMM pools. If you’re willing to actively manage positions and want maximum fee yield, use CLMM with carefully chosen price ranges. Many yield tools on MadeOnSol compare the two side by side, showing historical APR, volume, and impermanent loss for each pool type. Meteora’s DLMM offers a third option — dynamic concentrated liquidity with automatic repositioning, bridging the gap between passive and active strategies.