Price Impact

In an order book market or centralized exchange (CEX), the price impact of an order depends on both the order size and the distribution of existing limit buy or sell orders. The final execution price is typically the weighted average across multiple matching limit orders.

In contrast, the price impact in an standard or a concentrated liquidity protocol functions differently. During a swap, the relative value between the two tokens adjusts continuously, so the final execution price falls somewhere between the starting price and the ending price of the transaction. The degree of price impact is determined by the real-time liquidity available within the relevant price range. Greater liquidity depth at a specific price level results in a smaller price impact for a swap of the same size