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Lets water this down a bit, it is just for binding the ethanol so it does not evaporate before it enters the combustion chamber.
There are two other reasons for having a tiny bit of water in the mixture;
- it is already there when you make ethanol, and hard to get the last bit out; leaving that saves a lot of energy;
- it apparently makes the ethanol not only less volatile but also less aggressive on light metals like aluminum.
It also has the same effect as water injection would have, but as the content percentage is quite low so is the impact.
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