In today’s fast-growing world of crypto and blockchain, Muslims are increasingly seeking halal ways to invest and grow wealth. However, not everything in this space is Shariah-compliant. Among the common terms you hear—staking, liquidity pools, and yield farming—many raise serious concerns in Islamic finance. Let's understand why these are prohibited and what Muslims should do instead.

1. What is Staking and Liquidity Pooling?

Staking means locking up your coins in a blockchain network to earn rewards. You're basically lending your coins, and in return, you get profit—often based on how long or how much you stake.

Liquidity Pools work when users deposit their tokens into a pool, allowing others to trade using them. In return, depositors earn a share of the trading fees or interest.

2. Why Are These Prohibited in Islam?

These activities resemble riba (interest) and gharar (uncertainty)—two major elements forbidden in Islam.

a. Riba (Interest):

Most staking and liquidity pools offer fixed or speculative profit just by locking or lending your coins. It’s not tied to real trade or risk-sharing, but simply earning money from money.

Quran Reference:

“...but Allah has permitted trade and has forbidden riba (interest).”

—Surah Al-Baqarah 2:275

b. Gharar (Uncertainty):

In liquidity pools and DeFi staking, the mechanisms are often complex, and the investor doesn’t fully know where the funds are being used or the level of risk involved. This uncertainty is considered gharar, which the Prophet Muhammad (peace be upon him) prohibited in transactions.

3. The Right Alternative: Spot Trading

Spot trading means you buy a crypto asset (like Bitcoin or Ethereum) and own it immediately. You’re not lending it, not locking it, and not earning interest on it. It’s just like buying gold or silver—you pay for it and own it.

This form of trading is allowed in Islam, provided:

The asset is halal.

You avoid margin trading (borrowing money to trade).

You trade without interest or hidden contracts.

4. Summary: What Should Muslims Do?

Final Word

Muslims should be cautious when dealing with modern finance tools. Just because it’s trending or profitable doesn’t make it halal. Always verify with Islamic principles. Spot trading is the safest path—simple, clear, and aligned with Shariah.

“Whoever avoids doubtful matters clears himself in regard to his religion and his honor.”

—Hadith (Bukhari & Muslim)