Serverless applications on AWS offer increased agility while reducing operational overhead and costs. This paradigm is particularly well-suited for microservice-based architectures, which are gaining prevalence over monoliths due to their simplicity in development and deployment, but drawbacks such as tight coupling of components and full redeployment requirements. Serverless technologies like AWS Lambda functions can run small chunks of code in response to events emitted by other services, integrating with managed services like message queues, APIs, and event streams to minimize pain points associated with building microservices. A common design pattern for serverless microservices is the Strangler pattern, which gradually replaces components of a monolith with microservices using a strangler facade like API Gateway. This allows developers to migrate from monoliths to microservices while minimizing downtime and ensuring client requests are routed correctly. Managing complexity in microservice-based architectures can be achieved through patterns such as the State Machine pattern, which uses AWS Step Functions to orchestrate complex workflows, and the Aggregator pattern, which reduces chatty communication between clients and microservices by using a single Lambda function to accept all client requests and forward them to the appropriate services. Asynchronous and stream processing in microservices can be implemented through patterns like the Publisher-Subscriber pattern, which uses Amazon S3 to push messages to an SNS topic and triggers SQS queues to execute Lambda functions. Handling failures in distributed systems is crucial, and patterns such as the Circuit Breaker pattern, which monitors request failures and circuit breaker status using DynamoDB and a Lambda function, and the Saga pattern, which coordinates a sequence of local transactions in interconnected microservices using choreography or orchestration, can help ensure data consistency and fault tolerance. By adopting these design patterns and best practices, developers can build highly scalable and reliable serverless applications on AWS.