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Many blockchain networks' well-regarded decentralization and security benefits are highly dependent on one specific activity — crypto staking. Staking involves contributing crypto funds to proof of stake (PoS) blockchains to power the transaction validation activity on them. Stakers — which can be institutional entities or individuals — lock their cryptocurrency funds on these blockchains to receive the chance to validate blocks of transactions. In return, they receive cryptocurrency rewards for their work, making crypto staking a potentially viable income source.
Many individuals and smaller business entities who lack the technical capacity or financial reserves to act as blockchain validators can still earn staking rewards by delegating their funds to their preferred validator on a PoS blockchain.
Along with liquidity mining, yield farming and crypto coin trading, crypto staking is one of the critical ways to earn income within the blockchain industry. Many Muslim investors may wonder if crypto staking is a halal activity. In this article, we cover all the key details related to crypto staking and its status from an Islamic law perspective, in order to help Muslim investors decide whether staking cryptocurrencies is halal or haram.
Key Takeaways:
Crypto staking involves locking funds on PoS blockchains to help validate transactions. Stakers earn crypto rewards for their contribution to powering the functionality of these networks.
In most cases — and when using established, general-purpose blockchains — crypto staking is an activity free from riba, gharar and maysir, and may be considered halal for Muslim investors.