Understanding MilkyWay: Celestia Liquidity Staking Protocol Led by Binance

On April 30, Celestia ecosystem liquidity pledge agreement MilkyWay completed a $5 million financing, led by Binance Labs and Polychain Capital, and co-invested by Hack VC, Crypto.com Capital and LongHash Ventures. It is reported that the structure of this round of financing is a simple agreement for future equity (SAFE) and token warrants for joint lead investors, and a simple agreement for future tokens (SAFT) for participating investors.

MilkyWay was founded in December 2023 by a team of engineers and builders from Tendermint, Osmosis, Cosmostation, Oak Security and Composable Finance. As Celestia's custom liquidity staking protocol, MilkyWay has grown to serve over 156,000 milkTIA holders since its inception, and has staked over 2.6 million TIA tokens.

Currently, MilkyWay has seamlessly integrated with more than a dozen DeFi protocols, providing a holistic user experience covering trading, leverage, and lending activities, enabling users to earn additional returns beyond the native rewards of staking in the network.

Celestia also requires liquidity staking

Celestia is a modular blockchain designed to optimize data availability (DA) for integrated rollups. By separating the consensus layer and the data availability layer from execution, Celestia ensures secure and efficient data storage. The architecture allows Rollups to significantly reduce gas fees by leveraging Celestia for DA. Staking in Celestia plays a vital role, not only to protect its chain, but also to support a variety of applications by providing a data availability layer.

Simply put, users can stake TIA to participate in consensus and protect Celestia, and developers can use TIA as Gas to start Rollup.

Most importantly, the expected airdrop of staking TIA is one of the reasons why most users invest in TIA. Previously, Dymension's Genesis airdrop attracted a lot of attention. 70 million DYMs were airdropped to users of Celestia, Ethereum, Cosmos, and Solana, making the TIA staking narrative instantly popular. On February 6, Dymension announced the launch of the mainnet, and the community has also received the second batch of DYM rewards. Since the launch of Binance, DYM has reached a maximum of US$8.7.

DYM's profitability attracted airdrop hunters to focus on the Cosmos ecosystem, and the ecological project has also received a lot of exposure in a short period of time. Among them, Berachain uses Celestia as the DA layer and recently completed a $100 million financing. Many people said that Berachain may be able to lead a new round of DeFi craze.

According to Staking Rewards data, as of the time of writing, TIA's circulating market value is $1.73 billion, the pledged market value is $6.48 billion, the pledge ratio is 65.68%, the pledged amount is 683 million TIA, and the reward rate is 11.46%. Among them, TIA's pledged market value ranks eighth among all PoS public chains, and the pledge ratio and reward rate are also relatively high among the PoS public chains with the highest market value.

However, this staking and airdrop model is also touted as the (3,3) of the new cycle. Under this "Ponzi expectation", once people realize that the valuation is meaningless and the airdrop is diluted, they will start to close their positions. However, TIA's unstaking has a 21-day unbinding period, which will make staking users more anxious. After all, staking TIA can indeed get airdrops, but when the short incentive is gone, "When do I sell TIA?"

Related reading: " The (3,3) of the new cycle? The "Ponzi Expectation" of TIA's Staking Airdrop Model 》

The price of TIA has been "cut in half" from its highest point of $21 to $9.5 at the time of writing. If an unlucky user happens to participate in traditional staking at a cost of $21, he will lose half of his principal because he cannot sell it before he makes a profit from the staking.

This is the problem faced by Celestia staking - liquidity is locked, that is, the staked tokens cannot be traded in other DeFi ecosystems or used as collateral to earn more income. Although traditional staking can obtain certain airdrops or other rewards, when the token falls, users cannot withdraw the staked tokens, and they cannot sell them in time to avoid the "robbery" of the decline.

Thus, liquidity staking came into being. The advantage of liquidity staking is that investors can get twice the returns from both the original network and the re-staking network, and it can also improve the security and decentralization of the new network. MilkyWay is a liquidity staking protocol for the Celestia ecosystem.

Providing Liquidity to TIA Stakers

MilkyWay leverages the convergence of CosmWasm contracts, a multi-signature escrow system, and the Cosmos SDK authz module to introduce liquid staking derivatives to the Celestia ecosystem on the Osmosis blockchain.

Stake TIA to Earn MilkTIA

When users stake TIA tokens to MilkyWay, they receive an on-chain certificate of their TIA staked position, called milkTIA. This enables Celestia token holders to gain liquidity for their staked assets, enabling them to trade or use them as collateral for various DeFi products.

Users can use MilkTIA to participate in many DeFi ecosystem applications, such as adding liquidity to DEX or performing perpetual transactions: TIA/milkTIA pools on Osmosis will be created at launch to facilitate liquidity staking, or perpetual transactions on platforms such as Levana and dYdX. You can also participate in lending protocols (such as Mars Protocol and Umee) and pledge MilkTIA.

MilkTIA can also be used as Gas for payment. Chains and applications developed on Celestia will submit PayForBlobs transactions using TIA as Gas. If Celestia chooses to use MilkTIA as a payment method for Gas and data availability, this adjustment will promote improved chain security.

Introducing off-chain program monitoring interactions

Celestia is unique in that it separates the execution layer (which typically runs complex programs such as liquidity staking applications) from the consensus layer and data layer. The Celestia consensus layer does not support smart contract execution or cross-chain accounts, which poses a significant challenge to the liquidity staking architecture previously built on the Celestia ecosystem.

To solve this problem, MilkyWay's solution will initially be deployed and run on Osmosis. The CosmWasm staking contract on Osmosis facilitates TIA deposits (MilkTIA issuance) and withdrawals, as well as claiming TIA through accrued staking rewards. At the same time, MilkyWay has designed a daemon to facilitate the interaction between the staking contract and Celestia.

This is an off-chain program responsible for monitoring IBC transfers originating from Osmosis. It also listens to related events on Osmosis and Celestia, and assists MilkyWay operators in verifying and signing IBC and staking transactions, ultimately generating multi-signature transactions by aggregating the operators’ signatures.

To oversee and verify this process, MilkyWay will initially launch 9 trusted validators, including Stake.fish , Everstake , Chorus One , Allnodes , 01node , DSRV , Cosmostation , Hex Trust , and Keplr , these validators have collectively secured $5.86 billion in funding across ecosystems such as Ethereum, Cosmos Hub, Osmosis, and more. As the staking pool grows, so will the number of validators in MilkyWay.

How do I accumulate points on MilkyWay?

MilkWay introduces mPoints as points, which may be used as airdrop weights for MassDrop, with at least 10% of the total supply designated to mPoint holders. More information on the MILK token economics will be released soon. mPoints can be obtained by holding milkTIA, participating in liquidity pools, or participating in lending activities.

Holding milkTIA

When users stake TIA tokens to MilkyWay, they receive an on-chain certificate of their TIA staked position, called milkTIA.

First, go to the project website , click "Stake Now" to enter the staking interface, and recharge TIA to your wallet address before staking.

Click "Connect wallet" in the upper right corner to connect to your wallet. After the connection is completed, enter the amount of TIA staked, click "Stake", and sign in the wallet pop-up window to complete the stake.

Holding milkTIA can accumulate mPoints. The team will take daily snapshots of users' milkTIA balances, and each wallet address with a milkTIA balance will receive mPoints. For every milkTIA held, 1 mPoint will be accumulated every day. There is no minimum quantity requirement, but milkTIA must be on the Osmosis chain to be eligible for points.

Participate in DeFi protocols

Putting milkTIA to work can accumulate more points than just holding milkTIA. The team has selected a series of DeFi protocols to work with. For details, please check the Task List on the project website for the latest information on all whitelisted protocols.

Currently, milkTIA is compatible with Osmosis, Levana, Mars, Demex, Quasar and Margined. The project will take daily snapshots of the user's milkTIA, and each milkTIA in the whitelist protocol set will accumulate at least 1.2 mPoints every day.

Project Progress and Roadmap

Project Progress

Since its launch, MilkyWay has grown significantly. The protocol now serves more than 156,000+ milkTIA holders with over 2.6 million TIA tokens staked, and has been seamlessly integrated with more than a dozen DeFi protocols. These integrations provide a holistic user experience covering trading, leverage, lending activities.

The project is continuously working to enrich the broader modular ecosystem. This includes integrating with the Dymension ecosystem and its native DEX, thereby enhancing its rollups, as well as expanding its reach into the Arbitrum ecosystem through Camelot. Camelot is not only the largest native DEX on Arbitrum, but is also the preferred DEX for the Arbitrum Orbit chain, which uses Celestia for data availability (DA). These developments solidify MilkyWay's position as the leading provider of modular liquidity for Rollups that rely on Celestia for DA.

Project Roadmap

After the release of V1, Milky Way plans to raise seed round funds to expand the team and expand the product suite. The roadmap of the project is mainly divided into four steps.

The first step is to transform MilkTIA into a fully native liquid staking derivative, which is the next development focus. In V1, due to technical limitations, MilkTIA will be issued on the Osmosis chain. After V1, the main direction of the project is to migrate the issuance of liquid staking assets from the Osmosis chain to the Celestia rollkit. This transition is critical to enhancing the scalability and security of Celestia's liquid staking.

The second step will be the issuance of MILK tokens, the native token of the MilkyWay protocol. MILK holders will receive a portion of the protocol fees collected on all staking rewards generated by MilkTIA holders, and will also have governance rights over the protocol.

The third step is to launch the MilkyWay Protocol DAO. The DAO will be responsible for governing the protocol, including setting fees, managing the treasury, and developing new features.

Enable liquidity staking governance so that MilkTIA holders can vote for Celestia governance proposals.

The final step will promote the adoption of MilkTIA in other ecosystems such as Ethereum and other rollups to enhance the liquidity and accessibility of MilkTIA.

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