Skip to main content
Learn

How Does a ‘Liquidity Pool’ in DeFi Differ from a Centralized Exchange Order Book?

Liquidity pools use a formula (AMM) to set prices, unlike CEX order books which match buyers and sellers.
Greeks.Live23.11.25

How Does a ‘Liquidity Pool’ in DeFi Differ from a Centralized Exchange Order Book?

A liquidity pool, used by Automated Market Makers (AMMs) on DEXs, holds two or more tokens and uses a mathematical formula to determine the price. It does not use a traditional order book of bids and asks.

Trades are executed against the pool's assets. The CEX order book uses matching engine logic to pair buyers and sellers.

Liquidity pools introduce 'impermanent loss' but eliminate the need for a direct counterparty.

How Would This Formula Change for a Liquidity Pool Governed by a Constant Mean or Constant Sum Formula?
What Is an Automated Market Maker (AMM) and How Does It Differ from a Traditional Order Book?
How Does the ‘Fee Structure’ Differ between a Centralized Exchange (CEX) and a Decentralized Exchange (DEX) AMM?
How Does a Decentralized Exchange (DEX) Differ from a Centralized Exchange (CEX) in Terms of Liquidity Provision?

About

Contact

Editorial Policy

Terms of Service

Privacy Policy

Cookie Policy

© 2025 Greeks.Live

All Rights Reserved

Greeks.Live RFQ

Build by Noo on Engine

Source: The content on this website is produced by Greeks.live's proprietary analysis systems, which utilize advanced Large Language Models (LLMs). This information might not be subject to a full human review before publication and may contain errors.
Responsibility: You should not make any financial decisions based solely on the content presented here. We strongly urge you to conduct your own rigorous due diligence and to consult a qualified, independent financial advisor.
Purpose: All information is intended for informational purposes only. It should not be construed as financial, investment, trading, or any other form of professional advice. News and data are not trading signals.
Risk: The cryptocurrency, derivatives, and options markets are highly volatile and carry significant risk. By using this site, you acknowledge these risks and agree that Greeks.live and its affiliates are not responsible for any financial losses you may incur.