# FMM vs Existing Trading Models

In the cryptocurrency and decentralized finance markets, the choice of trading models is crucial for enhancing trading efficiency and optimizing user experience. Here is a detailed description and comparison of the Automated AMM(Market Maker model), the Order Book Trading model, and the FMM(Future Matching Market) model:

**1. AMM Trading Model (Automated Market Maker)**:

* **Essence:**The AMM model essentially allows users to interact directly with automated market makers (usually smart contracts), equivalent to 1:1 trading with a liquidity provider.
* **Trading Mechanism**: The trading price is determined based on a preset mathematical formula (such as x\*y=k). The liquidity provider (automated market maker) automatically adjusts prices based on the amount of assets provided by the user, often manifesting as the user's slippage loss, i.e., the difference between the actual trading price and the expected price.

**2. Order Book Trading Model**:

* **Essence**: The order book model is essentially trading between users. Buy and sell orders are recorded and matched in the order book, equivalent to 1:limit(n) trading, where one user's order is matched with multiple other users' orders.
* **Advantage**: When buy and sell orders are matched (market demand is balanced), users can achieve nearly 0 slippage trading.
* **Problem**: Market demand is often imbalanced, especially when the demand side only represents a small portion of all users. This imbalance can lead to sharp fluctuations in market prices, the so-called "price spike phenomenon," causing users to suffer significant slippage losses in large transactions.

**3. Future Matching Market**:

* **Essence**: The FMM model essentially involves trading between users, market makers, and the entire future market demand, which can be seen as a 1:n trading model.
* **Trading Mechanism**:
  * When market demand is balanced, users can achieve 0 slippage trading.
  * When demand is unbalanced, the lower limit of users' trading losses is similar to the AMM model, while the upper limit is still 0 slippage.
  * The FMM model matches user trades with overall market demand, aiming to maximize the reduction of user transaction losses while maintaining the immediacy of transactions.
* **Advantage**: The FMM model delicately handles market demand through time slicing and trade matching mechanisms, effectively smoothing market fluctuations and reducing user slippage losses.

In summary, each of these three models has its characteristics and applicable scenarios. The AMM model is known for its simplicity and ease of use but may lead to significant slippage losses. The order book model can achieve low slippage trading when market demand is balanced but may cause users to suffer significant losses during market volatility. The FMM model, on the other hand, is dedicated to reducing user slippage losses by finely processing market demand, providing a more balanced and stable trading environment while ensuring trading efficiency.


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