Order Book

An order book is a real-time, continuously updated list of outstanding buy and sell orders for an asset, organized by price level and used to match trades on an exchange.

How it works

An order book records two sides for a single trading pair: bids, which are offers to buy at a stated price, and asks, which are offers to sell. Each entry lists a price and a quantity. Orders are ranked by price, with the highest bid and the lowest ask sitting closest to the middle. The gap between those two is the spread, and the total quantity available at each price level is the depth.

A trade executes when a buy order and a sell order cross at an agreed price, usually following price-time priority, meaning better prices fill first and, among equal prices, earlier orders fill first. A matching engine performs this continuously. In traditional and institutional venues the book lives on a central server. In onchain markets the book may run in a smart contract or on a hybrid system where orders are held off-chain and settlement happens on-chain. In general ledger usage, the same phrase can mean a company's record of customer purchase orders, a separate meaning not covered here.

Why it matters

For an institutional reader, the order book is the primary record of available liquidity and price formation at a venue. Reading depth, spread, and the rate at which orders are placed and cancelled supports execution planning, slippage estimates, and market microstructure analysis. The same structure appears outside asset trading in prediction and event markets, as described in How Kalshi Works, From Order to Payout, where buy and sell interest in contract outcomes is matched the same way.

Related terms

• Bid-ask spread
• Market depth
• Matching engine
• Limit order
• Automated market maker (AMM)

Frequently asked questions

What is the difference between a bid and an ask in an order book?

A bid is an order to buy at a stated price, and an ask is an order to sell. The highest bid and lowest ask sit closest together, and the gap between them is the spread.

How does an order book differ from an automated market maker?

An order book matches discrete buy and sell orders against each other. An automated market maker prices trades from a pooled reserve using a formula, without matching individual counter-orders.

Can order books exist onchain?

Yes. An order book can run in a smart contract, or in a hybrid design where orders are stored off-chain and settlement is recorded on-chain.

Allium provides onchain data infrastructure. Companies named in this article may be Allium customers, prospects or commercial counterparties. The authors and other Allium personnel may hold positions in the assets discussed. This article is informational only and is not investment, legal or tax advice. Data and information last reviewed: October 19, 2026.