I’m glad you clarified but for the benefit of others. API is annual percentage interest, and APY is annual percentage yield.
In traditional finance, API is haram and should be avoided due to the interest obviously. APY or yield, on the other hand, may be better compared to a divided. For instance, you have a halal stock like Tesla, and you earn dividends for being a stock holder.
In simple terms if we apply this to crypto, there isn’t any obvious issue with it, so long as the underlying asset itself is halal and the staking method doesn’t involve riba.
There are of course the details that need to be assessed for every aspect of staking to be deemed halal or not, but as a general rule if we adopt the AAOIFI (Accounting and Auditing Organization for Islamic Financial Institutions) guidelines, we shouldn’t be too far off from what is widely accepted to be shariah-compliant or not.
As a reminder the AAOIFI guidelines for stocks are:
- Interest based debt: should not exceed more than 30% of market cap.
- Interest based deposit; should not exceed 30% of market cap
- Haram activities: should not exceed 5% of total income.
Apply this to Solana staking and see how it comes out.
Personally, I don’t stake as the risk (of loss) and uncertainty (of shariah-compliance) are greater. Besides, when a coin has 4X in the past couple of months, I don’t mind missing out on the 4-8%APY, but that’s just me.
Hope that helps.
FAQs
Crypto staking comes with risks. There are several drawbacks to cryptocurrency staking: Your assets have limited or no liquidity during the staking lockup period. Staking rewards (as well as staked tokens) can lose value when prices are volatile.
Can you make a lot of money staking crypto? ›
Whether crypto staking is worthwhile depends on what kind of crypto owner you are. Generally speaking, cryptocurrency staking offers returns that exceed those you can earn in a savings account. However, staking is not without risk. You'll earn rewards in crypto, a volatile asset that can decline in value.
Does staked crypto still increase in value? ›
The biggest risk you face with crypto staking is that the price goes down. Keep this in mind if you find cryptocurrencies offering extremely high staking reward rates. For example, many smaller crypto projects offer high rates to entice investors, but their prices then end up crashing.
Is staking crypto haram in Islam? ›
If you choose a project that supports nefarious activities such as alcohol, p*rnography, hate speech, or gambling, then your stake would be considered haram. However, if you invest in a morally sound project that supports socially productive activities, the rewards you earn are permissible.
Can I lose my crypto if I stake it? ›
In return, they earn the associated staking rewards. Staking ensures the stability and security of a PoS blockchain, as validators risk losing the crypto they've locked in the staking contract if they attempt to behave dishonestly and validate false transactions.
What is the best coin to stake? ›
According to our experts, the best crypto coins to stake include Bitcoin Minetrix (BTCMTX) and TG. Casino (TGC), which may offer impressive returns. Stablecoins like Tether (USDT) and Ethereum (ETH) can also provide relative stability in volatile markets.
Can you cash out staked crypto? ›
Withdrawal availability and unbonding periods are determined by the protocol. You can withdraw your crypto once withdrawals are available and the unbonding period has passed.
Can you sell crypto after staking? ›
Some staking partners may require you to lock up your cryptocurrency for a period of time to participate. Rajcevic points to some exchanges that could lock up your coins for as long as 180 days, meaning you'll be unable to un-stake them and sell.
How often does crypto staking pay? ›
Eligible tokens
| Token | Minimum Balance Needed | Rewards Payout Rate |
|---|
| Cardano (ADA) | 1 ADA | Every 5 days |
| Solana (SOL) | 0.002 SOL | Every 5 days |
| Polkadot (DOT) | No minimum balance | Every 1 day |
| MATIC (POL) | No minimum balance | Every 5 days |
4 more rowsAs a thumb rule of Islamic finance, interest (Riba) is strictly forbidden. On the other hand, so is the creation of legal tender without an intrinsic value. In the case of Proof of Stake, both of these become true hence ruling that any digital currency following the Proof of Stake (PoS) protocol is Haram.
Stake has received an Islamic Window license from the DFSA. With this approval, we are now permitted to offer Shariah-compliant Islamic Financial Business through the Islamic Window.
Can Muslims invest in crypto? ›
Muslim investors are encouraged to consult with Islamic scholars and adhere to Islamic finance principles. The consensus among experts suggests that for a cryptocurrency to be deemed halal, it must possess inherent value, serve a real-world purpose, and avoid association with illegal activities or excessive risk.
Can you withdraw staked crypto? ›
Withdrawal availability and unbonding periods are determined by the protocol. You can withdraw your crypto once withdrawals are available and the unbonding period has passed.
What is the downside to staking ethereum? ›
General Risks of Staking ETH
A smart contract locks up your ETH when you stake it, preventing you from accessing or trading it until the staking time expires. You can suffer losses if ETH's market price falls significantly while your funds are frozen.
What is the best wallet for staking crypto? ›
Here are the top three wallets for staking crypto:
- Coinbase Wallet. Coinbase Wallet, offered by the renowned cryptocurrency exchange Coinbase, is a hot wallet known for its user-friendly interface, making it ideal for beginners. ...
- MetaMask. ...
- Trust Wallet.
