MilkyWay Protocol has announced its decision to gradually phase out its operations and permanently shut down the protocol.
The protocol cited the failure of expected demand and adoption within the decentralized finance (DeFi) sector, alongside delays in the WayCard product's ability to alleviate financing pressures, as decisive factors in this closure.
Protocol's Evolution and Challenges
MilkyWay initially launched as the first liquid staking token (LST) for Celestia. Over time, it expanded its reach to the Initia and Babylon ecosystems. The protocol also explored restaking, tokenization of real-world assets (RWA), and the development of neobank-like products.
However, the team indicated that the DeFi ecosystem matured at a slower pace than anticipated. Interest in restaking diminished rapidly, and planned collaborations for RWA initiatives could not be realized due to unforeseen circumstances. Furthermore, the WayCard product, designed for daily expenses and rent payments, failed to achieve product-market fit, leading to limited operational runway.
Closure Process and User Refunds
As part of the shutdown process, all protocol features will be disabled starting immediately. The system is scheduled for complete termination after a designated closure date. MilkyWay has committed to returning its earned protocol revenue to its users.
The majority of this revenue originated from liquid staking fees, of which the protocol retained a 10% share. During the closure period, these accumulated protocol fees will be converted into USDC and distributed proportionally among MILK token holders.
A single on-chain snapshot was taken to facilitate this distribution, completed on January 14, 2026, at 13:00 (UTC+3). This snapshot encompassed MILK balances, MILK stakers, liquidity providers, and tokens held on exchanges across the MilkyWay L1, BSC, and Osmosis networks. Transfers made after this snapshot will not impact entitlement for the distribution.
The USDC distribution will be an automatic process, eliminating the need for users to engage in a separate claim procedure. For users holding MILK on centralized exchanges, MilkyWay has coordinated with the respective platforms to ensure that distribution will be handled directly by these exchanges.
Token Burn and Market Performance
MilkyWay also announced that all remaining tokens allocated for the team, foundation, community, and ecosystem, including any undistributed airdrop portions, will be burned. These tokens will not enter circulation.
In the wake of these announcements, the MILK token has experienced a decline, falling by 6% in the last 24 hours and by 42% over the past month.