Order Book DEX

Definition ∞ An Order Book DEX is a decentralized exchange that uses a traditional order book model for trading digital assets. Unlike automated market makers AMMs, an Order Book DEX allows users to place limit and market orders, where buyers and sellers specify prices at which they wish to trade. These orders are recorded on a ledger, often off-chain for speed, but settled on-chain for security. It provides a trading experience similar to centralized exchanges, but with assets remaining in user control.
Context ∞ Order Book DEXs represent a significant advancement in decentralized trading, offering features familiar to traditional finance participants. The key discussion revolves around balancing decentralization with performance, as fully on-chain order books can be slow and expensive. Hybrid models, where order matching occurs off-chain but settlement on-chain, are a prominent solution. Future developments will focus on improving liquidity, reducing latency, and enhancing the user experience to compete more effectively with centralized platforms.