In hair restoration, it works by increasing blood flow to hair follicles (angiogenesis), promoting hair growth cycle, reducing inflammation around follicles, upregulating collagen and extracellular matrix remodeling, and supporting stem cell activation within hair follicles
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This is ingredient-level research
doi:10.1097/FPC.0b013e3283576b6b Menon S, Nasir B, Avgan N, et al
Using sterile water without a preservative, or worse, tap water, will lead to bacterial contamination and a ruined batch