Blog What is a DEX, Part 3: AMM and Order Book Models

What is a DEX, Part 3: AMM and Order Book Models

#Ston Academy • 2 min read • Dec 23

There are two decentralized exchange (DEX) models: the Automated Market Maker (AMM) and the Order Book approach. Through short case studies of STON.fi and STORM Trade you’ll discover how these platforms revolutionize token exchanges, challenge traditional financial paradigms, and offer unprecedented levels of user control and market participation.

Two primary DEX models exist:

Automated Market Maker (AMM) platforms like STON.fi or Uniswap
Order Book-based exchanges like dYdX or STORM trade

Automated Market Maker (AMM) Model: STON.fi Case Study

STON.fi represents a pioneering AMM-based DEX in the TON ecosystem, embodying the core principles of automated liquidity provision. In this model, trading occurs through liquidity pools where users can swap tokens automatically without traditional order matching.

Key Characteristics:

Algorithmic price determination
Instant token swaps
Continuous liquidity provision
User-driven market creation

STON.fi’s innovation lies in its ability to create dynamic liquidity pools, allowing users to contribute assets and earn transaction fees. The platform uses mathematical formulas to calculate exchange rates, ensuring fair and instantaneous trading.

STON.fi V2 represents an updated functionality including features like Single-Side Liquidity Provision or Chained Liquidity Provision that make processes even more secure and comfortable.

Order Book Model: STORM Trade Exploration

STORM Trade exemplifies the traditional order book approach in decentralized exchanges. Unlike AMM models, this platform allows users to create precise buy and sell orders at specific price points, mimicking centralized exchange functionality.

Distinctive Features:

Manual order creation
Precise price control
Complex trading strategies (leveraged trading and access to shorts)
More traditional trading experience

STORM Trade enables users to set exact entry and exit points, providing more strategic flexibility compared to AMM platforms.

Wrapping Up

Decentralized exchanges (DEXs) offer unprecedented token diversity and user empowerment. Despite challenges like liquidity scarcity and potential security vulnerabilities, the DEX ecosystem continues to evolve, with innovative solutions like liquidity aggregators emerging to address market limitations. The unique combination of transparency, anonymity, and user control positions DEXs as a transformative force in the future of digital asset trading.

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