# Liquidity Pools and Adding Liquidity

![](https://611200381-files.gitbook.io/~/files/v0/b/gitbook-legacy-files/o/assets%2F-MjieKHxbxWQGr_xqBeD%2F-MkvFPnjd7djX2x1C1hg%2F-MkvLiqb2s1SIzOT4Jel%2FLiquidity%20Pools%20and.jpg?alt=media\&token=07631823-6eef-46b3-bfff-d8c354db4bea)

**WAP$WAP liquidity pools** allow you to provide liquidity by adding your tokens to liquidity pools or “LPs”.

When you add your token to a liquidity pool (LP), you will receive LP tokens (WAP$WAP’s version of liquidity provider tokens).

As an example, if you deposited $WAP and $BNB into a liquidity pool, you would receive WAP-BNB LP tokens.

The number of LP tokens you receive represents your portion of the WAP-BNB liquidity pool. You can also redeem your funds at any time by removing your liquidity.

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

[“Simply put, impermanent loss is the difference between holding tokens in an AMM and holding them in your wallet.” - **Nate Hindman**](https://blog.bancor.network/beginners-guide-to-getting-rekt-by-impermanent-loss-7c9510cb2f22)​

It’s not all bad for liquidity providers as you will also be given a reward in the form of trading fees. Whenever someone trades WAP, the trader pays a 0.25% fee, of which 0.18% is added to the liquidity pool of the swap pair they traded on.

For example:

* There are 10 WAP LP tokens representing 10 WAP and 10 BNB tokens.
* 1 WAP LP token = $1 WAP + $1 BNB
* Someone trades 10 WAP for 10 BNB.
* Someone else trades 10 BNB for 10 WAP.
* The WAP/BNB liquidity pool now has 10.017 WAP and 10.017 BNB.
* Each LP token is now worth 1.00017 WAP + 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 WAP$WAP farms, while still earning your 0.18% trading fee reward.