# Liquidity Pools

When you add your token to a Liquidity Pool you will receive Liquidity Provider (LP) tokens and share in the fees.

## LP Tokens

As an example, if you deposited **COLOSO** and **BNB** into a Liquidity Pool, you'd receive **COLOSO-BNB LP** tokens.

The number of LP tokens you receive represents your portion of the COLOSO-BNB Liquidity Pool.&#x20;

You can also redeem your funds at any time by removing your liquidity.

![](https://1115164865-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FRTkwillvDnRg763Kd3aZ%2Fuploads%2Fyj79RW1wAU3A9Sf6rwhe%2Fliquidity.png?alt=media\&token=a2af9e27-7f13-4e5c-9454-5e6ad4ec7ddd)

## Liquidity Providers earn trading fees

Providing liquidity gives you a reward in the form of trading fees when people use your liquidity pool.&#x20;

Whenever someone trades on Coloso, the trader pays a 0.25% fee, **of which 0.17%** is added to the Liquidity Pool of the swap pair they traded on.

For example:

* There are 10 LP tokens representing 10 COLOSO and 10 BNB tokens.
* 1 LP token = 1 COLOSO + 1 BNB
* Someone trades 10 COLOSO for 10 BNB.
* Someone else trades 10 BNB for 10 COLOSO.
* The COLOSO/BNB liquidity pool now has 10.017 COLOSO and 10.017 BNB.
* Each LP token is now worth 1.00017 COLOSO + 1.00017 BNB.

To make being a liquidity provider even more worth your while, you can also put your LP tokens to work whipping up some fresh yield on the Coloso Farms, while still earning your 0.17% trading fee reward.

## Impermanent Loss

Providing liquidity is not without risk, as you may be exposed to impermanent loss.
