Plain English
An order book is the running list of every buy order and every sell order on an exchange, sorted by price. The highest buy and the lowest sell sit at the top — the gap between them is the spread, and the point where they would meet is the market price.
How it actually works
Each row in the book is an order: a price, a size, and a side (bid or ask). When a buy order matches a sell order at the same price, the exchange engine fills both — the trade prints and both rows shrink or vanish. CEXes use this model. Some DEXes (dYdX, Hyperliquid) also use order books on-chain; most DEXes use AMMs instead.
What it means for you
Reading the order book tells you how deep liquidity is. A thin book means a $50K buy will move price 2%; a deep book absorbs it without flinching. Before any size trade, look at the book. For very large size, consider a limit order, an iceberg order, or an OTC desk instead of slamming the market.
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Educational content only. Not investment, tax, or legal advice.