> For the complete documentation index, see [llms.txt](https://docs.xspswap.finance/xswap-protocol/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.xspswap.finance/xswap-protocol/products/v2-dex/swap/liquidity-pools.md). # 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 **XSP** and **XDC** into a Liquidity Pool, you'd receive **XSP-XDC LP (XSP2)** tokens. The number of LP tokens you receive represents your portion of the XSP-XDC Liquidity Pool. You can also redeem your funds at any time by removing your liquidity.
## Liquidity Providers earn trading fees Providing liquidity gives you a reward in the form of trading fees when people use your liquidity pool. Whenever someone trades on XSwap, the trader pays a 0.3% fee, **of which 0.214%** is added to the Liquidity Pool of the swap pair they traded on. For example: * There are 10 LP tokens representing 10 XSP and 10 XDC tokens. * 1 LP token = 1 XSP + 1 XDC * Someone trades 10 XSP for 10 XDC. * Someone else trades 10 XDC for 10 XSP. * The XSP/XDC liquidity pool now has 10.0214 XSP and 10.0214 XDC. * Each LP token is now worth 1.00214 XSP + 1.00214 XDC. 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 [XSWAP Farms](https://xdc.farm), while still earning your 0.214% trading fee reward. ## Impermanent Loss 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)