Liquid Staking 101
Last updated
Last updated
Liquid staking is a method in Proof-of-Stake (PoS) blockchains that makes your staked tokens usable right away, instead of locking them for a set “unbonding” duration. In traditional staking, once you delegate tokens to a validator, you’d typically need to wait a certain period if you want those tokens back. By contrast, liquid staking lets you keep your staked position while giving you a liquid “receipt token” that you can transfer, trade, or deploy in DeFi protocols. You still earn staking rewards on your main tokens even though you hold a separate token representing them.
Dual Rewards: You receive the regular staking returns and also hold a tradable derivative (often called an LSD or LST).
Capital Freedom: Since you can use the newly minted derivative token elsewhere, you maintain flexibility: lend, provide liquidity, or engage in other yield strategies.
Risk: You’re still subject to the same slashing risks if your validator is penalized. Also, the derivative token’s market price may not always match the underlying asset’s value because of supply, demand, or liquidity factors.
Deposit Native Token: You send your original token (for example, TIA) to the protocol.
Protocol Mints a Liquid Token: The protocol then issues a liquid staking derivative (LSD)—for instance, milkTIA.
Freely Use LSD: You can use, swap, or otherwise trade this derivative in various DeFi applications, so your capital remains productive.
Quick Withdrawals: If you ever need to exit rapidly, you can swap the LSD on an available decentralized exchange—no need to wait for an unbonding period.
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.
Traditional staking provides users with the opportunity to receive staking rewards for securing the underlying L1. Liquid staking allows users to continue receiving the rewards while also earning additional yield across various DeFi protocols.
Liquid staking encourages more token holders to stake their assets, enhancing overall blockchain network security.
Stake 100 TIA: You decide to deposit 100 TIA into MilkyWay.
Receive 100 milkTIA: You immediately get 100 milkTIA as your liquid derivative.
milkTIA in DeFi: You can supply it to a DEX liquidity pool or a lending protocol.
Rewards Continue: Your TIA is still staked, earning baseline network rewards. Whenever you redeem your milkTIA, you can claim your original TIA plus staking accrual.
MilkAsset offers a wide range of use cases within the Cosmos and Ethereum ecosystem. The following examples are just a few of the potential uses, and there are many more opportunities available.
It can be used in a variety of DeFi or blockchain applications:
DEX Liquidity:
Provide liquidity pairs involving milkTIA, such as on Osmosis.
Lending:
Use milkTIA as collateral on money market platforms like Mars Protocol or Umee.
Staking Derivatives:
Create leveraged positions or custom baskets of staked assets.
Perpetual Trading:
Supply milkTIA to derivatives-focused protocols like Levana or Margined.
Payment for Data Availability or Gas:
If Celestia eventually accepts milkTIA for data blobs or transactions, that further aligns chain security with LSD usage.
Refer to our Discover page for all the DeFi integrations or reference Using third party apps to see where the milkAsset is currently listed on.
