Farmed coins from DeFi pool platforms halal?

So I’ve been reading all questions about pool reward, or so called farmed coins, on previous topics. Our brother mufti was not able to answer any of them except for the first one I posted 20 days ago (Investing Question: Is participating in a proof of stake network halal?). Mufti said it’s close to riba, and I think it was due to the poor explanation by me, as I was also learning about this new DeFi world.
Let me give it another explanation and suggest an approach, I will try not to name a single coin because mufti cannot review particular coins. There was another topic where mufti replied (Crypto Question: Yield Farming) and I would like to elaborate on it.
The most common yield farming is liquidity farming. Where user X put coin A & B into a liquidity pool C. This pool will be used for user Y to trade coin A into coin B or vice versa. The protocol of C coin determines that there will be a fixed amount of daily rewards given to all liquidity providers, depending on their proportion to the entire pool. Most of the protocols declared that these rewarding coins have no financial value. Note there’s a new form of reward that includes, a % of the trade fees that was done by user Y.

Personally, this looks like a typical market maker on an order book, where you do not have to worry about putting a sell or buy limit order but a code is doing it for you in the pool.

The review by brother mufti here (Crypto Question: Yield Farming), where he leans toward the coin being lent. I think he was reading COMP coin because is a platform for lending and borrowing with rewarding COMP coin. Though I am not sure if it’s used in a liquidity pool. I agree that COMP reward on is indeed very much like the typical lending and borrowing, but I would love for the mufti bro to take a look at liquidiy pools. Please remember impermanent loss that can rise from being a liquidity provider that was explained well here (Uniswap Liquidity Pools (Decentralized Exchanges)).

Binance launchpools are a place where most conservative retailers would use. Highly recommend to review only the liquidity pools offered by the centralized exchanges, like Binance.

Thank you brother and appreciate the work.

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Thank you brother for your analysis.

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Your welcome brother. We would like to know your Sharia thought on these matters Shaikh.


Asalam Alaikam.

To my limited knowledge liquidity pools use the same consensus algorithms as proof of stake.

On the exterior proof of stake does resemble a riba system of lending and borrowing but when we look behind the scenes at how the PoS mechanism actually works we find a complex security system of validators and nodes that keep the whole thing working. Staking ones coin in this model is to my understanding participating in the security of the eco system and sharia compliant.

Nevertheless I am no scholar of the deen nor a tech guru and my analysis and opinion can be wrong.

InshAllah Mufti Faraz and others like you can provide their professional opinions on this.

JazakAllah Khair to Mufti Faraz for posting a link to Amanah Advisors.

They have some very interesting articles on blockchain technology.

I highly recommend reading them when doing your own research.

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Whether fee earned from uniswap liquidity pool riba?

User X put coin A & B into a liquidity pool in uniswap with ratio 50:50. This pool will be used for user W, Y and Z include User X it self if he trade coin A into coin B or vice versa. Uniswap charge fee for every trade 0.3% and then all collected fee distributed to all liquidity providers if liquidity provider remove their coin A & B from liquidity pool. There could be some realized impermanent loss if they remove liquidity not exactly at the same price when they add liquidity. Reward that earned by all liquidity providers will be depending on their proportion to the entire pool and trade volume of that pool. Uniswap team not charge any fee for them self, but all to liquidity providers.

The way I understood uniswap’s liquidity pools is that it’s an automatic market maker protocol system.
When you pool your tokens you’re in effect providing security by depositing your tokens and receiving a cut of the transactions fee’s. The same as you would when staking.
The only difference here being the impermanent loss due to price fluctuations.

If I understand correctly standard liquidity pool is utilising an Automated Market Maker which is effectively a programmatic asset broker - thus just earning a portion of the fees in relation to your stake of the DAO.

However I am doubtful about Binance Smart Pool in particular, which claims to also give bonus interest on your liquidity contributions to maximise return.

Assalamu alaikum

Can someone please clarify if sheikh said if its not haram to farm tokens on liquidity pools? Is it similar to staking a coin?

Got into duck dao liquidity pools thinking it is same as staking and they have one sided burn when you unstake you loose 50% of your coins. Now I am confused on what to do.

Thank you

bump for this thread jisy came accross celcius and just wanted to know if apy is same as interest?

please go through this list for celcius and other top 50 coins

im.more interesting in the lending them crypto and gaining on it. is that still interest? its not staking but you lend your crypto to them for money i believe. or is the whole celcius thing haram?

yes, lending is the thing that we are actually trying to avoid. Celcius and blockfi are basically lending and interest bearing… liquidity pools on the other hand is not as clear as you are not lending the money, but providing liquidity that facilitates trades, and then you get a portion of those trading fees. still waiting on a clear response if liquidity pooling is haram or not


yeah I’d like to know if this is halal or not as well.

Anyone can conclude on this? Are the way binance liquidity pools halal?

Any updates on this topic on whether rewards earned from being a Liquidity Provider is haram/halal?

Assalamualikum , can you please provide a clear statement on whether Liquidity mining/providing is halal or haram.