# Adding Liquidity & Sponsorship

### **What is liquidity pool?**

Liquidity pool functions to improve the liquidity of each knowledge market topic and minimize slippage (the difference in expected winner vs loser % when a large trade is placed). A big liquidity pool will allow users to submit large bids while keeping the expected winner vs loser % close to 50%:50%. A detailed simulator is available [here](https://docs.google.com/spreadsheets/d/1w67ruq6XrBr_MekBPeAwNZqYZC8DUx2BmSqDnNIi1hE/edit?usp=sharing).

### **How to add liquidity?**

Users can provide liquidity by clicking on "Add Liquidity". LPs earn 1.5% fees from the bidding pool to cover their impermanent loss.

### **What is impermanent loss?**

Impermanent loss refers to a temporary loss caused to a LP due to imbalance in winning and losing bids.

### **What is LP fee?**

Every bid incurs a fee paid out directly to LPs to cover their impermanent loss because facilitating large bids in a market requires liquidity. More liquidity in a market reduces slippage for users when they place a large bid. Without liquidity, there would be significant slippage & the expected winner vs loser % will be far from 50%:50%.

### **What is sponsor pool?**

If a topic piques your interest and you want to see high-quality results coming out from the topic, you can sponsor the topic by funding the bidders & LPs directly.
