Introduction

MilkyWay offers a liquid staking solution for the Celestia ecosystem; it will initially be deployed and operated on Osmosis. The long term plan is to migrate to Celestia's rollkit for native milkTIA (receipt token that users receive when staking TIA with MilkyWay. It is a reward-bearing token that increases linearly against TIA over time.) issuance.

When users liquid stake their TIA coins (the native coin on Celestia) with MilkyWay,they receive an on-chain representation of their TIA staking position, known as milkTIA. This empowers Celestia token holders to access liquidity for their staked assets, enabling trading or their use as collateral in various DeFi products.

Liquid staked TIA automatically compounds staking rewards, and users can withdraw their TIA to receive their native tokens and accrued staking rewards.

What is Celestia?

Celestia is a modular blockchain that provides a secure and scalable foundation for decentralized applications (dApps). It does this by separating the consensus and data availability layers from the execution layer. This allows Celestia to focus on providing a secure and efficient way to store and order data, while leaving the execution of transactions to other blockchains.

Liquid Staking

Liquid staking enables users to stake their native tokens without the need to lock them up for a specific period of time. This is accomplished by providing users with a liquid token in exchange for their staked tokens. The liquid token can then be used in various DeFi applications, including lending and borrowing. When users want to withdraw their tokens instantly, they can do so by swapping the liquid token for the native token on a decentralized exchange (DEX).

Benefits of liquid staking include:

• Liquidity and Flexibility: Liquid staking allows token holders to earn rewards and participate in network security while retaining the flexibility to trade or use their staked assets at any time, eliminating the need to choose between staking for APR and participating in DeFi activities.

• Improved Network Security: Liquid staking encourages more token holders to stake their assets, enhancing overall blockchain network security.

• Capital Efficiency: Liquid staking is a more capital-efficient solution for blockchain projects and DeFi applications, as they don’t need to compete with the native staking yield.

What milkTIA Can Be Used For

1. DEX Liquidity: A TIA/milkTIA pool on Osmosis will be created at launch to facilitate liquid staking.

Other possible use cases:

1. Lending: Collateral in lending protocols such as Mars Protocol and Umee.

2. Staking derivatives: Create staking derivatives such as stakers’ baskets and leveraged staking positions

3. Perpetual trading: Trade perps on platforms such as Levana and dYdX.

4. Payment for Blobspace and gas on Celestia with milkTIA: Chains and applications developed on Celestia will use TIA to access Celestia’s data availability by submitting transactions with PayForBlobs and as a method of payment for gas fees. Should Celestia choose to incorporate milkTIA as a means of payment for both gas and data availability, this alignment will foster improved chain security. Chains will no longer have an incentive to forgo staking to ensure TIA availability for data availability and gas transactions.

Why Liquid Staking is Important to Celestia

Celestia is a modular blockchain providing a secure and scalable foundation for decentralized applications (dApps). It achieves this by separating the consensus and data availability layers from the execution layer. This structure allows Celestia to focus on a secure and efficient method for data storage and ordering, while leaving the execution of transactions to other blockchains. Launched in October 2023, Celestia has already achieved up to a 100X reduction in transaction costs for rollups. The chain is designed to scale; as adoption increases, fees decrease.

Staking holds greater importance in Celestia than in other typical appchain ecosystems. The consensus layer secures not only its own chain but also numerous applications using the base chain for data availability, thus safeguarding the applications they build.

Liquid staking enables users to stake their native tokens without locking them up for a specified period. This is achieved by issuing a liquid token in exchange for the staked tokens, securing Celestia and maximizing users' TIA returns simultaneously.

Staking Process

1. Initiation: When a user stakes TIA on MilkyWay — the TIA is transferred from Celestia to Osmosis via IBC, then deposited into a CosmWasm Staking Contract.

2. Calculation and Minting: The contract calculates the amount of milkTIA to provide based on TIA’s exchange rate. It then mints milkTIA and provides the user with milkTIA as a tokenized representation of the staked TIA coin. The milkTIA is sent to the user’s Osmosis account.

3. IBC Transfer Message: The contract then sends the user’s TIA from Osmosis to the Staker Multisig on Celestia.

4. Monitoring: The Coordinator tracks funds moving from Osmosis to Celestia for MilkyWay transactions.

5. Stake: The Coordinator stakes uniformly across all MilkyWay’s validators on Celestia using the Grantee’s account.

Exchange Rate of milkTIA: TIA

In the MilkyWay protocol, it is important to maintain an accurate milkTIA: TIA exchange rate. Exchange rate is based on the following formula:

ExchangeRate= TotalLiquidStaked

TokenTotalNativeToken

TotalNativeToken = Staked TIA + accrued staking rewards. TotalLiquidStakedToken = milkTIA minted

It will initially start at a 1:1 ratio and will be dynamically updated based on the accrued staking rewards.

The Economics of the MilkyWay Protocol

MilkyWay Protocol will charge a 10% fee on all staking rewards generated by milkTIA holders. This fee will be held in a treasury contract. It will be used to fund development, provide incentives to users and validators, act as insurance to compensate stakers in the event of slashing, and support the Celestia ecosystem.

MilkyWay Protocol Token

MILK will be the native token of the MilkyWay Protocol. MILK holders will receive a portion of the 10% protocol fee charged on all staking rewards generated by milkTIA holders. MILK will also be the governance token of the MilkyWay Protocol, meaning that MILK holders will have the power to vote on changes to the protocol, such as new features, fee structure, and treasury management.

The MilkyWay Protocol is committed to being 100% governed by a decentralized autonomous organization (DAO). This means that the community will have full control over the protocol and its future.

Security of the MilkyWay Protocol

The security of the MilkyWay Protocol is of utmost importance, and it is ensured through a diligent approach:

• Thorough Testing and Auditing: Before its launch, the smart contracts and off-chain programs used in MilkyWay will undergo comprehensive testing and meticulous auditing.

• Open Source Code: We value transparency. The protocol’s code will be made openly accessible, allowing experts and the community to review and improve it collaboratively. This openness enhances security through collective scrutiny.

• An Experienced Team: MilkyWay is powered by a team of seasoned blockchain professionals, including individuals from Tendermint, Osmosis, Cosmostation, Crescent, Oak Security, Composable Finance, Crypto.com.