Automated market makers
A liquidity pool quotes exchanges from its reserves and a pricing rule instead of waiting for a matching order.
Curious about a word? Tap a dotted term for its meaning.
A USEFUL DISTINCTION
AMM vs order book
A reserve pricing rule and a set of executable orders organize liquidity differently.
| Look at | Automated market maker | Order book |
|---|---|---|
| Liquidity representation | Assets supplied to a pool under a pricing curve. | Resting buy and sell orders at specified prices. |
| Trade execution | Against the pool’s reserve or liquidity configuration. | Against matching orders, sometimes across several levels. |
| Supplier role | LP owns a changing reserve position and may earn fees. | Market maker posts and updates orders and manages fills. |
| Price impact | Depends on the curve, available liquidity, and trade size. | Depends on executable depth at each price level. |
| Range behavior | Concentrated positions can become inactive outside their range. | Orders execute at specified limits or better, subject to venue rules. |
Hayden Adams, Noah Zinsmeister and Dan Robinson · Uniswap v2 Core ↗Checked 13 Nov 2026Uniswap developer documentation contributors · Fees across Uniswap versions ↗Checked 13 Nov 2026Coinbase developer documentation · Exchange Matching Engine ↗Checked 13 Nov 2026Coinbase developer documentation · Trading ↗Checked 13 Nov 2026Uniswap developer documentation contributors · How Uniswap Works ↗Checked 13 Nov 2026dYdX documentation contributors · Limit Order Book and Matching ↗Checked 13 Nov 2026
THE KEY DISTINCTION
What to carry forward
“Decentralized exchange” is not synonymous with AMM. An exchange can use an order book with onchain settlement or hybrid components.
MAKE IT CONCRETE
A worked perspective
A large trade can move through many order-book levels or far along a pool curve. Both outcomes reveal that the top-of-book or spot price is not a promise for unlimited size.
Open the scenarioFollow the underlying mechanisms
Order books and market depth
An order book collects offers to buy and sell. Execution depends on the available quantities at each price.
Decentralized exchanges
A DEX settles exchanges through blockchain rules, but its market design, interfaces and administrative controls still matter.