Definition
An orderbook is a structured record of all outstanding buy and sell orders for a specific trading pair on a market, typically displayed in real time. It is organized by price, with bids (buy orders) on one side and asks (sell orders) on the other, and usually shows the total quantity available at each price level. The orderbook is central to price discovery, because it reflects the prices at which participants are willing to trade and the depth of liquidity at those prices. On a CEX, the orderbook is maintained by the exchange’s matching engine, which continuously updates it as orders are added, modified, or filled.
Context and Usage
In crypto trading, the orderbook provides a snapshot of market conditions that helps explain how a Market Order or Limit Order is likely to be executed. The distance between the highest bid and the lowest ask in the orderbook is known as the Spread, and it indicates how tightly prices are clustered. When large orders move through thin parts of the orderbook, they may cause Slippage because trades execute across multiple price levels. Orderbooks are a defining feature of orderbook-based markets on a CEX, distinguishing them from designs that do not rely on visible, centralized order queues.