Order Book

An order book is a list of buy and sell orders for a specific asset, organized by price level, which facilitates price discovery in traditional and centralized financial markets. It shows the market depth by displaying the quantity of an asset available at various price points on both the bid and ask sides.

While automated market makers use algorithms to price assets, order books rely on the interaction of individual buyers and sellers to determine market equilibrium. Many modern decentralized exchanges are attempting to replicate the order book model on-chain to provide a more familiar experience for professional traders.

The order book is a fundamental tool for understanding market sentiment, supply-demand dynamics, and potential price support or resistance levels. It serves as the primary technical architecture for matching buyers and sellers in transparent environments.