How Is the Concept of a ‘Limit Order Book’ Different from the AMM Pricing Model?

A Limit Order Book (LOB) is a collection of specific buy and sell orders placed by individual traders at defined prices. The price is determined by the intersection of supply and demand from these discrete orders.

The AMM model, conversely, uses an algorithmic formula (x y = k) to continuously and automatically determine the price based on the current ratio of reserves, providing continuous liquidity without the need for matching specific orders.