Order Book DEX
Hybrid Limit Order Solution
Order book DEXs matches trades by aggregating all user specified buy and sell orders for an asset pair into an order book list. Through the creation of a buy and sell order list, potential trades can be identified through comparing matching buy and sell orders. In this case, liquidity is generated through the submission of potential trade orders which are executed when a matching trade is found.
Specific to DeFi order book implementations, such DEXs will usually require users to commit to their order by signing a transaction which is only submitted to the limit order smart contract upon a matching order being found. Orders are distributed across a network of counter-parties who will execute and fill the order by submitting a matching buy order. This ensures that funds can’t be double-spent while avoiding the hefty gas fees required for constant manual adjustment of orders. Critically, order book DEX liquidity relies on having a deep order book consisting of user defined orders.