The order book model is a trading mechanism used by exchanges where buy and sell orders for a specific asset are listed and matched according to price and time priority. It displays all open orders, showing the quantities and prices at which participants are willing to trade. This model facilitates price discovery and provides transparency regarding market depth and liquidity. Centralized exchanges commonly employ this structure for efficient asset exchange.
Context
While traditional centralized cryptocurrency exchanges widely use the order book model, decentralized finance is exploring alternatives and adaptations. A key discussion involves the trade-offs between the efficiency and deep liquidity often found in centralized order books versus the censorship resistance and self-custody benefits of decentralized automated market makers. Hybrid models are currently being developed to combine the advantages of both systems, aiming for improved user experience and capital efficiency.
High-throughput perpetual DEXs surpassed $1.43T in monthly volume, validating specialized app-chain and Layer 2 architectures as the future of on-chain derivatives.
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