An order book is a real-time, electronically maintained list of all pending buy (bid) and sell (ask) orders for a cryptocurrency trading pair, organised by price level. Order books are the foundational price discovery mechanism of all centralised exchanges — the engine that matches buyers with sellers to determine market prices.
ORDER BOOK STRUCTURE
Bids (Buy Orders): All pending orders to buy at specified prices, sorted from highest price (best bid) to lowest. The highest bid is called the "best bid" or "bid price." Asks (Sell Orders): All pending orders to sell at specified prices, sorted from lowest price (best ask) to highest. The lowest ask is called the "best ask" or "ask price." Bid-Ask Spread: The difference between the best bid and the best ask — the cost of immediately executing a trade. Tighter spreads indicate more liquid markets.
KEY ORDER TYPES
Market Order: Executes immediately at the best available price. Guaranteed execution, no price certainty. Takes liquidity from the order book. Limit Order: Placed at a specific price. Only executes when the market reaches that price. Adds liquidity to the book — often earns maker rebates. Stop-Limit Order: Triggers a limit order when a specified stop price is reached. Stop-Market: Triggers a market order at the stop price. Iceberg Order: Large order displayed in small visible increments to avoid market impact.
READING ORDER BOOK DEPTH
The depth chart (or market depth chart) visualises cumulative buy and sell orders at each price level. Thick buy walls (large aggregated bid volume at a price level) provide support — large buyers willing to absorb selling. Thick sell walls (large aggregated ask volume) provide resistance — must be consumed before price advances. Walls can be genuine institutional orders or "spoofed" orders placed and cancelled to manipulate perception.
ORDER BOOK VS AMM
Centralised exchanges and dYdX use order books for price discovery. Decentralised AMMs (Uniswap, Curve) use mathematical formulas instead of order books. Order books offer tighter spreads for large trades but require active market makers. AMMs provide always-available liquidity at any size but with price impact.
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Altcoin - "alternative coin" - is any kind of digital currency other than Bitcoin. Since the launch of Bitcoin, the world's first digital currency, many altcoins (as well as supporting blockchains) have been created. Altcoin digital currencies share many similarities to Bitcoin, but consistently and have significant differences. There are about 20,000 altcoins, and this number is expected to grow significantly in the coming years. Altcoins often develop Bitcoin features. Ethereum, currently the most widely used blockchain, supports digital contracts and separate applications where Bitcoin does not. Altcoins are also often created to cater to the needs of different users. The Litecoin blockchain, for example, can process payments quarterly for the duration of Bitcoin.
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