TL;DR
An order book DEX matches buy and sell limit orders directly, showing all pending orders at different price levels — the same mechanism used by traditional stock exchanges.
An order book displays all open buy orders (bids) and sell orders (asks) arranged by price. The best bid is the highest price someone is willing to pay; the best ask is the lowest price someone is willing to sell at. When a bid and ask overlap, a trade executes. The spread (gap between best bid and best ask) indicates liquidity tightness. Professional market makers continuously place and update orders on both sides.
AMMs are simpler (deposit liquidity, the formula handles pricing) but suffer from impermanent loss and can’t handle complex order types. Order books offer limit orders, maker/taker fee structures, and no impermanent loss for market makers, but require active management and sophisticated participants. AMMs dominate for long-tail tokens; order books work better for high-volume pairs with professional market makers.
Phoenix is Solana’s leading order book DEX, designed for high-performance on-chain trading. OpenBook (the community fork of Serum) still operates. Jupiter routes through order book DEXs when they offer better prices than AMMs. Solana’s fast block times and low fees make it one of the few chains where on-chain order books are practical — on Ethereum, the gas cost of placing and canceling orders makes it uneconomical.