What is Order book?

An order book is the list of open buy and sell orders on a venue, sorted by price. Bids are what buyers will pay, asks are what sellers will accept, and the gap between the best bid and the best ask is the spread. A trade happens when a new order crosses the book and matches resting orders, taking liquidity from it. Centralized exchanges run order books, and so do on-chain venues like Hyperliquid and Lighter.

Depth is what the book shows that a price alone cannot. A screen full of small orders near the mid means a large trade will walk through many levels; a few large resting orders mean the price will hold. Reading depth is how traders estimate the real cost of getting in or out, which is why order-book venues publish it and why aggregators chart it.

The alternative model is the automated market maker, where a pool with a formula replaces resting orders and every trade moves the pool's price along a curve. Order books give tighter pricing for liquid assets and need active market makers; AMMs work for anything with a pool and charge the difference as slippage.

For tracking, order books matter twice: they are the source of the prices a portfolio is marked at, and on on-chain venues the book itself is public data, which is how an address's open orders and fills can be read without a key. TrueHold marks perp positions at the venue's mark price and reads fills from the public book.

Order-book venues distinguish makers from takers. A resting limit order adds liquidity and usually pays a lower fee or earns a rebate; a market order that crosses the spread removes liquidity and pays more. Over many trades that fee difference is real money, and it is one reason active traders prefer limit orders even at the cost of an occasional missed fill.