## 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:

$ExchangeRate = \frac {TotalLiquidStakedToken}{Total NativeToken}$

*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. To understand how this works, let’s consider an example:

Alice is MilkyWay’s first user and she stakes 100 TIA, she then receives 100 milkTIA in return.

$ExchangeRate = \frac {100} {100}=1$

Let’s assume that time has passed and 10 rewards were accrued.

Now, the new exchange rate would be:

$ExchangeRate = \frac {100} {100 + 10}=0.91$

If Alice decides to withdraw her TIA, she receives 110 TIA for 100 milkTIA based on the new exchange rate.

*Please note that this is an illustrative example of how the exchange rate works and did not account for the validator’s commission and the MilkyWay DAO fee.*