> For the complete documentation index, see [llms.txt](https://docs.babydogeswap.com/babydoge-docs-1/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.babydogeswap.com/babydoge-docs-1/products/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 **BabyDoge** and **BNB** into a Liquidity Pool, you'd receive **BabyDoge-BNB LP** tokens.

The number of LP tokens you receive represents your portion of the BabyDoge-BNB Liquidity Pool.

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

## Liquidity Providers earn swap fees

Providing liquidity gives you a reward in the form of swap fees when people use your liquidity pool.

Whenever someone swaps on BabyDogeSwap, they pay a 0.3% fee, \*\*of which 0.2% \*\*is added to the Liquidity Pool of the swap pair they traded on.

For example:

* There are 10 LP tokens representing 10 BabyDoge and 10 BNB tokens.
* 1 LP token = 1 BabyDoge + 1 BNB
* Someone trades 10 BabyDoge for 10 BNB.
* Someone else trades 10 BNB for 10 BabyDoge.
* The Baby/BNB liquidity pool now has 10.040 BabyDoge and 10.040 BNB.
* Each LP token is now worth 1.00040 BabyDoge + 1.00040 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 BabyDoge Farms, while still earning your 0.2% swap 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)