Salaam guys
Just catching up on this thread.
Key things are:
- In principle, POS is permissible (subject of course to the underlying cryptocurrency itself not being dodgy). Here is the reasoning:
Proof-of-Stake (POS) is an alternative to the standard Proof-of-Work (POW) approach to blockchain verification and cryptocurrency issuance.
POW is the method used by Bitcoin and others and relies on you using your CPU power to do random maths problems, and upon solving that you get to make the new block on the blockhain (and earn some bitcoin as a result of this).
But the problem with this approch is the immense computational power needed. An alternative is the POS approach which essentially allocates the right to create the new block on the blockchain on the basis of your ownership of existing coins. So the older and more coins you own, the more likely you are to be allocated the right to create the new block on the blockchain.
POS is therefore simply a mechanism among a group (the group of those who own this cryptocurrency) to facilitate issuance of new tokens and the creation of new blocks for the blockchain and continued validation. Sure, one could quibble with the implication of it - that the ones with the most coins typically get richer - but ultimately our view is that this is a statistical likelihood and actually depends on who early adopters are (who took a risk at the time). Additionally, POS and other alternatives to POW need to be encouraged given the immense climate change harm that POW does. Finally, POS and other alternatives to POW are inevitably going to be needed with blockchain is to realise its potential. POW just takes too long, uses up too much energy to be any practical use for an actual currency.
- Getting paid interest to give your coins to someone else to stake for you is not generally permissible in my humble view. Sometimes it can be though. Reasoning below.
The people you are giving that money to are themselves engaging in a halal activity, but their transaction with you is impermissible. They are saying to you “lend us £100 and we’ll give you £105 back in 1 month.” That is interest. However, where the payback to you is done in a currency other than the one that you gave them, i.e. they gave you £100 and then paid you back in $, then that can be permissible.
The reasoning behind that is that if we view each cryptocurrency as a digital asset, one can exchange between them as we like, and one can also take a delayed delivery of them as well. So just like I can buy £100 worth of apples to be delivered to me in 1 month, one can also buy £100 worth of BTC to be delivered to me in a month. The amount of apples and BTC are entirely up for negotiation between the two parties.
If in any doubt on this matter, I’d stay clear.