What Is an Order Book? How Prediction Market Orders Work
An order book is a list of all open buy and sell orders for a prediction market. It shows available prices and quantities, enabling transparent price discovery.
Definition
An order book is an organized list of all pending buy orders (bids) and sell orders (asks) for a given market. It shows the price and quantity at each level, giving traders a real-time view of supply and demand.
Order Book Structure
| Bids (Buy) | Price | Asks (Sell) |
|---|---|---|
| $0.72 | 500 shares | |
| $0.71 | 200 shares | |
| 300 shares | $0.70 | |
| 150 shares | $0.69 |
- Bids — orders from traders willing to buy at a given price.
- Asks — orders from traders willing to sell at a given price.
- Spread — the gap between the highest bid ($0.70) and lowest ask ($0.71).
Order Book vs. AMM
Some prediction markets use Automated Market Makers (AMMs) instead of order books. AMMs use mathematical formulas to set prices, which is simpler but often results in wider spreads and more slippage.
Purrdict uses Hyperliquid’s central limit order book (CLOB), which provides:
- Tighter spreads
- Better price discovery
- No impermanent loss
- Professional market maker participation
Why Order Books Matter for Prediction Markets
Order books produce more accurate probability estimates because prices reflect real orders with real capital behind them. The depth of the book shows how confident the market is in its estimate.