Initially when people asked me about my opinion on PoS I thought they were referring to Arabic dictators.
It turns out they were talking about Proof of Stake and whether or not I thought it was halal or haram.
So here it is, my attempt to answer the question:
Is Crypto Staking Halal or Haram?
What is crypto staking?
Crypto staking involves locking up your cryptocurrency for a period of time in return for a reward that is typically paid to you in the cryptocurrency itself
Example:
- You have 10 Rakaani coins.
- You commit them to a wallet for staking.
- After 7 days you receive a reward for staking your coins of 1 Rakaani coin.
- Your wallet now has 11 Rakaani coins in it.
The amount of reward you get from staking is proportional to how much cryptocurrency you stake and for how long.
The reason why cryptocurrency software is often designed to incentivize staking with rewards is that the staked coins help increase the security and integrity of the cryptocurrency’s blockchain.
There are differences between how staking is done for different cryptocurrencies but this is generally how it works.
Does Staking Involve Riba?
From what I described staking involves committing money and hoping to get your money back with a return.
While this may sound like riba to many, it is not sufficient.
After all, committing money and hoping to get your money back with a return is at the core of every financial investment you can think of.
Riba is present in a loan of money wherein the lender has the expectation of benefitting from their loan.
In Islam, the only permissible loan of money is that which is done as charity.
So a requirement for the suspicion of riba to be valid is that there has to be a loan of money either explicitly, like in the case of riba al-nasia, or disguised like in the case of riba al-fadl.
In the case of staking, is there a loan of money?
A loan of money involves a lender, a borrower and a principal amount of money that must be returned.
Are these elements present in crypto staking?
No.
There is no borrower.
As is clearly evidenced by the fact that you can do crypto staking on your own.
You don’t need a human counterparty.
Assuming you have the technical know-how and the minimum number of tokens for your chosen blockchain, you can lock your tokens into your Proof of Stake blockchain without the involvement of anyone else.
After all, you are transacting with the software, not another human.
Granted, most people will use a platform like Coinbase or Binance to facilitate their crypto staking for them because either they don’t have the technical expertise to do it on their own, the minimum number of coins, or they just don’t want to spend the time and effort required.
However, using the convenience of an intermediary doesn’t change the nature of the transaction and what is being done.
Now one may ask: where are the rewards from staking coming from? Are they just popping out of thin air?
Basically, yes.
Cryptocurrencies are governed by software. The software determines when new coins are created and rewards are distributed.
When you earn your staking rewards, no other person’s cryptocurrency balance is decreasing.
The algorithms for that particular cryptocurrency’s software are what is creating the rewards.
Isn't Staking Gambling?
Isn’t crypto staking risking your money in a valueless activity and therefore a form of gambling?
Again, without going into the technical details, the more coins are staked the more secure the network becomes.
Therefore, it is not a valueless activity.
Doesn't Staking Cause the Rich to Get Richer?
Isn’t crypto staking allowing the rich to get richer since all you have to do is commit money in order to get more money?
I don’t think there is anything in Islam that discourages the rich from getting richer so long as they are producing value and not being unfair to anyone else in the process.
With crypto staking, the staker is helping secure and validate the blockchain which makes the crypto holdings of everyone else associated with this blockchain more valuable.
Conclusion
Generally speaking, I find no objections to crypto staking in Islam.
The relevant hadith here is:
لاَ ضَرَرَ وَلاَ ضِرَارَ
عَنْ أَبِى سَعِيدٍ الْخُدْرِيِّ أَنَّ رَسُولَ اللَّهِ صلى الله عليه وسلم قَالَ
There should be neither harming nor reciprocating harm
Hadith from the Prophet Muhammad PBUH
In the case of Crypto Staking I don’t see anything inherently harmful to the participants nor harmful to others.
Here I should acknowledge that there are thousands of cryptocurrencies and staking is not going to work the same for all of them.
My conclusion about staking does not include instances where the crypto is being lent out to a borrower.
Asalamwailykum
Jazak Allah khair for the much needed judgement of staking. May Allah reward you abundantly
I have a question regarding staking Axion tokens; would you kindly clarify further on this Insha'Allah?
Jazak Allah khair
Assalamu dearest brother,
Jazakumullah khayran for such an amazing piece.
I learnt so many things from here.
I want to stake all my coins as well.
Which platforms do you recommend to stake?
I previously staked my coins with Binance, but later I unstaked them. Because they said that they give 'interests' inside that 'reward'. I had to chat with them for hours just to make sure that they are not giving me any interests. When they made sure, I immediate unstaked every coins.
I do not want any single penny which is haram.
I would appreciate if your could share with us a list of websites who we can stake with and who would guarantee that my coins will NOT be used to give borrow to someone.
I wanted to make sure that I get rewards, not interests.
Thank you for your kind cooperation.
I truly appreciate your time and efforts to help your readers.
Kind regards
You can stake on your own with vps as this is also safer method because no one knows if the service get shut down
JazakAllah khair for sharing. I've always wondered if crypto currency, bitcoins, stock markets are halal or haram. I guess I have gained some knowledge here... :)
Thank you this is crystal clear
As salamu aleykoum,
Thank you for your post.
I 've some research, and noticed that many App which proposes stacking are base on Defi.
My understanding of Defi is a landing of money, which looks like to be halal.
I wanted to do it with "swissborg" with the "yeld stacking".
What do you think about it?
BarakaAllahoufik
Sub haan Allaah.
Akhee, fear Allaah, and refrain from speaking in matters wherein you lack knowledge.
The example you gave above is a clear example of usury.
Riba is not only in regards to loans. Look into the source books of fiqh or the narrations on buying and selling. Even the tafsir for Suratud Dain would give you the proofs you are seeking.
You need to repent from your words and give people clear correct guidance, and spread that repentance with equal zeal and promotion as this article.
Remember you will be held accountable for what you say, and you are not a scholar to be issuing verdicts.
Certainly, the scholars have spoken and they consider bitcoin similar to gold and permissible, provided you purchase it without delay, meaning hand-to-hand, not on the common bank transfer credits that exchanges offer. And provided that you pay zakat on it, and other affairs they have mentioned in detail. Refer to the research by Shaikh Aqeel (hafidhahullaah) for the Permanent Committee in KSA.
Other Cryptos may likewise be permissible.
But, to endorse or openly support that people use the Staking function, is clearly short sighted and based upon your own desires.
If you go to the bank, and put your money into a special account, let’s call it a saving account, and it says it guarantees (X%) returns, then what do you think you are doing?
You are engaging in Riba.
Likewise, if your staking program can guarantee you that you will receive X% of returns, in accordance to the amount of coins you provide, that is clear Riba.
Look into the ahadith, the books of fiqh, and the words of the righteous scholars before you delve into filling your belly and the bellies of your audience with fire.
You will be held accountable for your misdeeds and all those you mislead down this wretched path.
But, don’t fear. Repent to your Lord, for He is All-Forgiving and Merciful and He is the Only One Who may Forgive sins, so call upon Him alone and seek His forgiveness, and He will forgive you.
May Allaah guide you to the truth regarding those matters where-in people differ. May He guide you to permissible forms and sources of wealth and provision, and may Allaah forgive you for your errors.
And, May Allaah raise the rank of and grant peace to His final Messenger, his family, his companions and all those who follow him in righteousness until the hour is established.
Wa Salaam.
Dawood
Salamualaikum All.
Abū Tasnim Don't you think BANK SAVING ACCOUNT is like you are lending your money for them to used after sometimes and add interest to the saved money? While in CRYPTO WALLET, the money is only kept without using it and driving benefit by someone???
PLEASE, we Muslim brothers need help and clarity about all these confusing issues.
WE DON'T WANT TO DO SOMETHING THAT ALMIGHTY ALLAH WILL PUNISH US.
AND WE MUSLIMS DON'T LIKE HOLDING OUR HANDS AND WATCH OTHERS BENEFITING FROM THE NEW TECHNOLOGY!!!
THANKS LOT!!
Aslam o Alikum,
Nice response brother. What if the return is not guaranteed and your investment value (you can loose money) can go up or down ?
Wa Salaam
Shahid
Assalamu alaikum warahmathullahi wabarakathuhu.Brother in savings account they use your money to.borrow someone and ask them for interest but in this case you're cryptos is just locked and you get reward for it.This is what he said.Because the blockchain needs coins to help increase the security and integrity of the cryptocurrency’s blockchain. In riba u lend money to someone and asks them to return it and also putting some n% interest.But here you put your money and get rewards.Myabe this can go like this.If the exchange platform use our cryptos.They can't use it to lend someone and to get interest.But they can trade with it and make some profits and they give some profit to you.Anyway the staking is halal if it would be in the first way or MAYBE it is halal in the second way(in case they do future trades or something like that).So anyway I didn't stake any crypto and whatsoever.I don't risk myself for a thing which isn't clearly halal.Here still I see some fog.But the people can just hodl on their own.Hodl it to raise(or fall).But hodl is ok.
-Assalamu alaikum warahmathullahi wabarakathuhu brother.
AssalamuAlaikum Brother Alfareeth
It is my opinion that it is closer to the right thing to do to stake rather than hodl, that is because you are committing your coins to the security of the network when staking. And Allah doesn't look very fondly upon hodlers
۞ يَا أَيُّهَا الَّذِينَ آمَنُوا إِنَّ كَثِيرًا مِّنَ الْأَحْبَارِ وَالرُّهْبَانِ لَيَأْكُلُونَ أَمْوَالَ النَّاسِ بِالْبَاطِلِ وَيَصُدُّونَ عَن سَبِيلِ اللَّهِ ۗ وَالَّذِينَ يَكْنِزُونَ الذَّهَبَ وَالْفِضَّةَ وَلَا يُنفِقُونَهَا فِي سَبِيلِ اللَّهِ فَبَشِّرْهُم بِعَذَابٍ أَلِيمٍ (34)
Soorat Altawba, 34
My practice is to use 25% of my staking income as Zakat. That is because I view my staking income in a similar light to fruit trees that require no upkeep. And Zakat on the rain watered land الزراعة البعليّة is 25% on income. And since the principle is being commited to the network: it is my view that there is no Zakat required on the principle.
I am not a Sheikh and I am in no way a Sharia professional. But these are my practices given that the Sharia framework regarding cryptocurrencies is in its Infancy.
As AMINU and Sulaiman Alfareeth said, banks that pay interest on balances loan out the money that you deposit into them. That's where the riba comes from. They are not just giving you money for no reason. The reason that staking isn't riba is because, as Rakaan described, there is no borrower of the crypto. The crypto is not being lent out, and the rewards given are income for providing a service. (Just to clarify, again as Rakaan touched on, this is not necessarily how all cryptos have their staking work, but most work like this. Do your due diligence.)
Just because an investment you have guarantees you a percentage return doesn't mean that this return is riba. Take dividends paid on stocks, for example. The dividends are a set rate of return for each stock of a company that you own. The dividends are not riba, they are income, because you own shares of the company and are receiving your portion of their profits.
It would be best for us to double-check the information that we plan to share online, especially when it comes to issues of such a serious nature, because we may end up saying something wrong about someone and confusing people with misinformation.
Thnx brother now i am in 50-50 whether to stake or no but by looking u comment its better not to stake ....just for 2 or 3 coin i dont want Allahs punishment
Assalamulaikum, what your opinion on benefitting from the transaction fee? , such as a coin will charge 10% fee when u buy or see then the fee will be distributed to the holder of the coin, it does not involve lending right, but just the coin yield deflatianory. such coin are safemoon, rocketmoon , and other new coins.
*sell
Actually It is clearly "Riba" and your explanation is not convincing!
Assalamu Alaikum Warahmathullahi Wabarakathuhu. Can you please explain about Binnace Liquid Swap? Can we invest our cryptos in the liquidity pool?
Assalomu aleykum
Thanks a lot for this video
But i am wondering is DPoS is halal or haram because it works in some kinda another way plz could you make video on that also thanks
Staking / Defi and DPoS is 100% RIBA, just stay away from it.
100% HALAL is Trading and HODL it like you own a GOLD.
Do you think staking with Anchor Protocol is halal?
A very important topic has been chosen. Of course, there is a lot to learn from this.
We hope you'll cover more important topics like this
1- The way you described PoS, this is the Riba.
If you have anything to add or a different method of stacking, I’ll be happy to read your explanations.
What you just explained to us, is the definition of Riba.
I don’t know how you came up with the conclusion that this is not Riba. A duck is a duck!
2- Regarding you interpretations / explanation about why it is not Riba does not hold and is far from the truth. Your personal opinion justifying that what you just described is not Riba is false / wrong.
Staking is your coin is working to become a validator in blockchain network then you will get reward / interest..
Any mechanism that will make rich people getting more richer and poor people getting more poorer, is RIBA.
if you have million coin, means you will get richer faster, if you have little coin, you will waste your time, so poor people will stay poor or getting more poorer..
So STAY AWAY from staking, Trading is 100% halal, if you can not trade because price is low, just hodl it..
The Almighty Allah says: "Allah will destroy Riba (usury)…"[Al-Baqarah 2:276]
Jazak Allah brother for this detailed analysis.
Keep doing this good work 👏