The launch of Uniswap v3’s range-defined liquidity provision also opened a door to a new category of DEX service providers. Uniswap v3 liquidity providers were often finding the price of assets moving out of their defined range for liquidity provision. As a result, LPs have to manually re-deploy liquidity and closely monitor their positions. This entails amplified impermanent loss (which is realized) and thus less profitability.
Automated liquidity managers optimize liquidity deployment around current price ranges, re-invest fees, and group transactions to reduce gas costs. The graph below shows a concentrated liquidity manager deploying liquidity ranges corresponding to price changes of ETH.