# How the AMM + Order Book Model Works

### Hybrid AMM + Order Book Model

Monday Trade employs a hybrid model that seamlessly integrates an **Automated Market Maker (AMM)** with an **onchain order book**, delivering both **instant liquidity** and **precise trade execution** on a single platform.

#### Core Architecture

At the heart of the system is a **tick-based architecture**, where price levels are discretized into fixed intervals (“ticks”). This framework enables structured liquidity and granular order placement.

The protocol is composed of three main components:

* Liquidity Handler (AMM Management)
* Order Handler (Limit Order Management)
* Swap Handler (Trade Execution)

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#### AMM Mechanics

The AMM serves as a **fallback liquidity source** when limit orders are unavailable or insufficient. Traders can always execute trades at the current AMM price.

* Inspired by **Uniswap V3**, liquidity is concentrated into **custom price ranges**.
* The **liquidity handler** calculates **active liquidity**, i.e., liquidity available in the current price range.
* Swaps are routed through a **swap router or custom aggregator**, ensuring optimal execution even for less liquid tokens.

***

#### Onchain Order Book

The **order book** is managed by the order handler and allows users to place **limit orders at specific ticks** (e.g., "buy ETH at $2000").

* Orders must be placed at ticks **above or below the current price**, depending on the token pair (e.g., token0 = ETH, token1 = USDC). This reduces arbitrage risks.
* **Orders on the same tick are merged** for efficiency and clarity.
* **Filled orders are automatically withdrawn** before new placements can occur at the same tick.

***

#### Swap Execution & Lazy Crossing

The **swap handler** introduces a novel **lazy crossing mechanism**, optimizing gas costs while maintaining order book precision.

* **Fine-grained ticks** are used for order placement, while **coarser ticks** are used for swap settlement.
* **Lazy crossing** updates only the necessary **swap ticks during trade execution** and delays order tick updates until the next relevant order placement.
* A **nonce system** ensures correctness and prevents desynchronization.

> ✅ This mechanism delivers up to 98% gas savings — for example, crossing 101 order ticks may only update 2 swap ticks.


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