Chitosan is produced commercially by deacetylation of chitin, which is the structural element in the exoskeleton of crustaceans (such as crabs and shrimp) and cell walls of fungi.Chitosan is under research for several potential dietary or clinical applications: As a soluble dietary fiber, it may increase gastrointestinal lumen viscosity and retard emptying of the stomach, creating a sense of satiety. It alters bile acid composition, increasing the excretion of sterols and reducing the digestibility of ileal fats. It is unclear how chitosan does this, but the currently favored hypotheses involve the increase of intestinal viscosity or bile acid-binding capacity.Chitosan is relatively insoluble in water, but can be dissolved by dilute acids, which would make it a highly-viscous dietary fiber. Such fibers might inhibit the uptake of dietary lipids by increasing the thickness of the boundary layer of the intestinal lumen, which has been observed in animal experiments.Having very few acetyl groups, chitosan contains cationic groups. This may cause chitosan to have bile acid-binding capacity, which causes mixed micelles to be entrapped or disintegrated in the duodenum & ileum. This would interrupt bile acid circulation, causing reduced lipid absorption and increased sterol excretion, which has also been observed in animal experiments.* (source: wikipedia)
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