MilkyWay Brings Liquid Staking to Celestia (TIA)

Celestia is one of the hottest new blockchain projects in the industry, with the native token (TIA) seeing huge increases in price and trading volume since its introduction in November earlier this year. Interest in the modular blockchain network is set to reach new heights with developers MilkyWay bringing liquid staking into the fold for TIA investors.

What is Liquid Staking?

Staking is an important mechanism for Proof-of-Stake blockchains (such as Ethereum, Solana and Celestia). Essentially, investors can contribute toward the network’s security by locking up a certain amount of a native cryptocurrency – so in Celestia’s instance, TIA. Then, every time a transaction is conducted on the network, a “staker” (or validator) will be randomly selected to verify that the transaction is legitimate. 

In exchange for the validator’s work securing the network, they receive in-kind rewards (additional TIA). This usually translates to a rewards rate similar to what one would receive from a high-interest saving account – around 4-8% per year.

However, in the above example, users who stake their tokens cannot easily access them or use them elsewhere. This is especially prevalent in Cosmos-based staking products, which tend to have a three-week “unbonding period”. That’s where liquid staking comes into the picture. 

Essentially, those who “lock up” their TIA will receive a proportionate amount of a liquid staking token (milkTIA) that can then be used across the DeFi ecosystem. When the user wishes to unstake their TIA, they can redeem it using their remaining milkTIA balance.

What Are the Risks?

The prospect of rewards on rewards is the major appeal of liquid staking, but it doesn’t come without its risks. DeFi products can be vulnerable to smart contract bugs that result in major hacks (and loss of funds). 

Additionally, liquid staking’s secondary market can present some issues for validators. If there is a liquidity crunch for milkTIA, or some other de-pegging event occurs, the liquidity token may not be redeemable 1:1 for the main token. However, it’s worth noting most blockchains have protocols in place to prevent this from occurring.