> For the complete documentation index, see [llms.txt](https://docs.mmt.finance/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.mmt.finance/core-products/momentum-dex/core-mechanics/clmm.md). # CLMM ## CLMM Momentum’s CLMM (Concentrated Liquidity Market Maker) allows liquidity providers (LPs) to allocate their capital within custom price ranges rather than distributing it uniformly across the entire market. This enhances capital efficiency, ensuring that liquidity is concentrated where trading activity is highest, leading to improved price execution and higher fee earnings for LPs. In a traditional AMM model, liquidity is spread across all possible prices, resulting in inefficiencies where a significant portion remains unused. By contrast, Momentum’s CLMM enables LPs to define precise price bands for their liquidity, maximizing utilization and optimizing capital deployment.

Momentum CLMM

When the market price moves outside an LP’s chosen range, their liquidity becomes inactive and stops earning fees. However, LPs can actively manage their positions by adjusting price ranges to align with market conditions. This flexibility allows for dynamic strategies that adapt to volatility and trading trends. By concentrating liquidity, Momentum enhances trading depth, reduces slippage, and improves the overall efficiency of the exchange. This model creates a more responsive and capital-efficient environment for both LPs and traders.\ \ **Price Ticks** Unlike traditional AMMs, where price changes continuously, CLMMs use price ticks—discrete intervals that divide the price curve into predefined steps. Each tick represents a 0.01% price movement (1 basis point), creating a structured framework for liquidity distribution. Every liquidity position in CLMM is defined by an upper and lower tick, set by the LP. As swaps occur, the protocol uses up liquidity in the current tick interval before moving to the next one. Once the price reaches a new tick, any dormant liquidity within that range becomes active, ensuring a smooth transition of liquidity as prices shift. The spacing between ticks varies based on the pool’s fee tier. Lower fee tiers allow for tighter tick spacing, making price changes more granular—ideal for stablecoin pairs where precise pricing is crucial. Higher fee tiers, on the other hand, result in wider tick spacing, which is better suited for volatile assets. This tick-based structure optimizes liquidity efficiency, ensuring that assets are concentrated in high-activity price zones while reducing unnecessary slippage. **Active Liquidity** In Momentum’s CLMM, liquidity is only active and earning fees when the market price is within the set range of a position. If the price moves outside this range, the liquidity becomes inactive, meaning it stops earning fees until the price re-enters. As the price fluctuates, liquidity providers (LPs) experience a shift in asset composition. If the price rises to the upper boundary of their position, they will hold only the second asset. Conversely, if the price drops to the lower boundary, they will be left with only the first asset. Once the price moves back into range, the position becomes active again, and fees start accumulating. Since CLMM allows LPs to define custom price bands, they can open multiple positions at different ranges to adjust for market conditions and optimize their earnings. Rather than a static distribution, liquidity naturally concentrates around the most traded price levels. This ensures deep liquidity where it's needed most, following the flow of market demand rather than being evenly spread across all prices. \\ --- # Agent Instructions This documentation is published with GitBook. GitBook is the documentation platform designed so that both humans and AI agents can read, navigate, and reason over technical content effectively. Learn more at gitbook.com. ## 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.mmt.finance/core-products/momentum-dex/core-mechanics/clmm.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.