HCS Score
91/100
Research Opinion, Not a Fatwa
These are absolute prohibitions in Islamic finance. If any red line is triggered, the asset is automatically classified as HARAM.
Ecosystem Riba Exposure
Not directly or indirectly connected to interest generating mechanisms
Gambling / Betting
No gambling or betting mechanism
Haram Industry
Not involved in haram industry
The asset is scored across 7 Shariah principles.
Based on Red Line Screening and HCS Scoring.
Halal
This cryptocurrency is evaluated as Halal for investment and use because it shows strong alignment with CoinStudy HCS principles.
Explanation
This cryptocurrency is evaluated as Halal for investment and use because it shows strong alignment with Coin Study HCS principles.
Reviewed by
CoinStudy Shariah Board
If Bitcoin is digital gold, Ethereum is digital civilization.
Bitcoin solved one problem elegantly: peer-to-peer value transfer without trusted intermediaries. Ethereum posed a more ambitious question: what if you could run any agreement, any application, any financial service without a central authority controlling its execution?
The answer has been over ten years of the most consequential experiment in decentralized computing in history. Smart contracts execute commercial agreements automatically. Tokens represent ownership of assets, governance rights in protocols, and access rights to services. Decentralized applications serve millions of genuine economic users. Layer-2 networks process transactions at costs below two cents. Institutions have committed billions of dollars to Ethereum infrastructure through regulated investment vehicles.
For Muslim investors the compliance question is not whether Ethereum is impressive. It is whether ETH passes the specific criteria that classical Islamic commercial law applies to financial instruments. The answer requires engaging precisely with Ethereum's specific Level 1 and Level 2 protocol mechanisms in 2026 rather than with the broader ecosystem of Level 3 applications deployed on it.
CoinStudy's Chairman Dr. Usman Quddus, PhD in Islamic Studies & Finance, reviewed the complete Ethereum analysis and provided a formal ruling: Ethereum is functioning well and has brought genuine improvement to commerce and trade. It provides equal economic rights to both Muslim and non-Muslim society alike. The direct causes of prohibition are absent. For these reasons Ethereum is permissible.
We ran ETH through the full CoinStudy Halal Crypto Standard methodology applying all adversarial vulnerability categories proactively, the full range of classical Islamic commercial law principles, and the principles relevant to applicable AAOIFI standards. The analysis has been self-hardened against all 30 THETA-derived adversarial categories and against 8 additional issues identified in adversarial review before writing.
Ethereum scores 91 out of 100 Halal under CoinStudy's Halal Crypto Standard, confirmed by Chairman Dr. Usman Quddus, PhD in Islamic Studies & Finance. All five Layer 1 red-line checks pass at the Level 1 and Level 2 protocol assessment scope. The revised score of 91 reflects the application of the correct four-level HCS Scope Framework which removes Level 3 scope contamination that was present in earlier drafts. The Chairman's ruling confirms that the direct causes of prohibition are absent from Ethereum's core protocol. The score of 91 rather than a higher number reflects specific and honestly documented concerns at the Level 2 MEV-Boost mechanism, the active Ethereum development ecosystem's influence over protocol direction, and Lido's validator concentration in the staking governance dimension.
Ethereum is a decentralized, programmable blockchain platform and the world's most widely deployed smart contract infrastructure network. It was launched in 2015 by Vitalik Buterin and a founding team, transitioned from Proof of Work to Proof of Stake in September 2022 through The Merge, and continues to evolve through a structured upgrade roadmap.
ETH is Ethereum's native token serving two primary functions at Levels 1 and 2. It is the gas token that pays for all computational execution on the network: every transaction, every smart contract call, and every token transfer requires ETH to pay the validators who process it. It is also the staking asset that validators lock as economic security collateral to participate in the Proof of Stake consensus mechanism.
According to available research, approximately 39.7 million ETH representing approximately 32% of circulating supply was staked as of mid-2026, secured by more than 1.24 million validators. The base consensus yield sits near 2.7% with MEV-Boost adding approximately 0.5 to 1% bringing realistic all-in staking returns into the 3.1 to 3.3% range. According to CoinMarketCap research, ETH currently trades at approximately $2,664 with a market capitalization of approximately $325 billion.
Institutional adoption and market capitalization are evidence of economic recognition and genuine market confidence. They are not independent evidence of Shariah permissibility. The compliance classification rests on ETH's specific Level 1 and Level 2 protocol characteristics assessed against Islamic commercial law principles.
Pectra Upgrade: Effects Fully Operational in 2026
The Pectra upgrade activated May 7, 2025 with effects fully operational throughout 2026. According to available research, Pectra was the most substantial change to Ethereum since The Merge, combining the Prague execution-layer fork and the Electra consensus-layer fork with eleven Ethereum Improvement Proposals.
The three most compliance-relevant changes from Pectra are at Level 2. EIP-7251 raised the maximum effective balance for validators from 32 ETH to 2,048 ETH. This allows large-scale stakers to consolidate multiple validators into fewer positions and allows staking rewards to automatically compound within the validator position. The compliance analysis of auto-compounding is addressed in the Guaranteed Interest dimension above. EIP-7702 introduced account abstraction allowing traditional externally owned accounts to temporarily function as smart contracts, enabling gasless wallets and batch transactions. Account abstraction is a user experience improvement at Level 3 application interaction with no compliance implications for the Level 1 and Level 2 protocol assessment. According to available research, compounding validators represented above 26% of validator stake share by May 2026 and rising. According to available research, average Layer-2 transaction fees remain consistently below $0.02 throughout 2026.
Fusaka Upgrade: December 2025 Effects Operational in 2026
According to available research, the Fusaka hard fork went live December 3, 2025, extending Pectra's foundation through PeerDAS, improving blob fee mechanics, and supporting more Layer-2 activity at lower costs. Lower transaction costs make genuine permissible commerce more accessible on the Ethereum network and increase the genuine utility of ETH as a gas payment token.
Glamsterdam and Hegota: Scheduled 2026
According to available research, the Glamsterdam upgrade focusing on parallel execution and gas limit expansion is expected mid-2026, and Hegota later in 2026 aims to implement Verkle Trees and statelessness to ensure long-term decentralization by reducing node storage requirements. Both upgrades continue the compliance-positive trajectory of expanding genuine network utility while reducing hardware barriers to validator participation.
Spot Ethereum ETFs and Staking Products
According to available research, spot Ethereum ETFs accumulated approximately $14 billion in total assets under management by May 2026. According to available research, BlackRock launched ETHB in March 2026 as the first major US Ethereum ETF product with staking functionality. Spot ETF assets under management reflect institutional capital allocation and regulatory recognition. They are not evidence of the network's genuine utility for real economic activity. The compliance of specific ETF products depends on their individual structure: an ETF that guarantees a fixed yield regardless of actual staking performance creates Guaranteed Interest concerns while one that passes through genuinely variable staking rewards proportionally has different compliance characteristics. Individual ETF structure assessment is required and is addressed in the activity matrix.
The June 2026 Darul Uloom Karachi Fatwa
According to available research, the same June 2026 fatwa from Darul Uloom Karachi that classified Bitcoin as Haram also classified Ethereum as Haram, carrying the signature of Mufti Taqi Usmani and five other scholars. CoinStudy addresses this with the same honest engagement applied in the Bitcoin analysis.
CoinStudy acknowledges the June 2026 Darul Uloom Karachi fatwa classifying Ethereum as Haram and the scholarly stature of its signatories including Mufti Taqi Usmani with complete respect. This is a genuine scholarly disagreement within Islamic jurisprudence.
The arguments that support the Haram position for Ethereum may be stronger than for Bitcoin. Ethereum's role as the primary infrastructure for DeFi lending, perpetual futures trading, and prediction markets means its economic activity includes a larger proportion of Level 3 Haram-classified applications than Bitcoin does. Scholars who hold that infrastructure specifically optimized for and whose primary value proposition includes enabling Haram financial products creates a facilitation concern beyond what infrastructure neutrality permits would apply that reasoning more forcefully to Ethereum than to Bitcoin.
CoinStudy's Chairman Dr. Usman Quddus reviewed these arguments specifically and confirmed the 91 out of 100 Halal assessment. The Chairman identified three considerations supporting his ruling: Ethereum's genuine contribution to commerce and trade, its equal availability to Muslim and non-Muslim users, and the absence of direct causes of prohibition in the core protocol. The third consideration is the analytically determinative one under CoinStudy's four-level framework: the direct causes of prohibition are absent from Ethereum's Level 1 and Level 2 protocol. The Level 3 DeFi applications are assessed separately under their own individual analyses.
Muslim investors who follow the Darul Uloom Karachi ruling should respect the scholarly tradition they trust. CoinStudy publishes its analysis transparently for the Muslim community to evaluate against all available scholarly opinion.
The most important Islamic finance question about Ethereum in 2026 is whether Level 2 native validator staking rewards are permissible service compensation.
CoinStudy applies the same three-condition HCS operational test used in the THETA guardian node analysis and the THORChain node bonding analysis. The Ethereum validator staking mechanism at Level 2 lacks all three conditions that would trigger the Guaranteed Interest red line for the reasons documented in the red-line section above.
The distinction between native Ethereum validator staking at Level 2 and liquid staking derivatives at Level 3 is essential and must be stated precisely. Native ETH staking through operating a validator node at Level 2 is the most compliance-defensible form of Ethereum staking participation. It requires genuine active technical participation, carries slashing risk for dishonest behavior, and earns variable rewards from genuine consensus service. Level 3 liquid staking through Lido, receiving stETH, and subsequently using stETH as DeFi collateral for additional yield is a separate Level 3 activity. stETH is not ETH. Its compliance characteristics, the derivative instrument nature of stETH, the compound yield from DeFi composability, and Lido's governance implications, are assessed separately and do not affect ETH's Level 1 and Level 2 compliance classification.
MEV-Boost at Level 2 is the most nuanced staking mechanism consideration. Validators using MEV-Boost earn additional rewards from block-building optimization within the protocol's established rules. CoinStudy reflects the compliance nuance of MEV-Boost earnings as a minor Financial Exposure Risk deduction acknowledging the open compliance question about value extraction economics without declaring MEV income prohibited.
Ethereum's governance structure differs meaningfully from Bitcoin's and this difference is reflected honestly in the Transparency and Governance score.
Bitcoin has no active development team making ongoing protocol decisions after Satoshi Nakamoto's permanent departure. Ethereum has an identifiable and active development ecosystem with substantial collective influence over protocol direction. The Ethereum Foundation funds researchers, contributes to client teams, and participates in EIP prioritization and roadmap discussions. Multiple client teams including Geth, Erigon, Besu, Nethermind, Lighthouse, and Prysm implement protocol changes. Academic researchers contribute protocol specifications. Validators and node operators adopt or reject changes through their choice of client software.
Protocol changes in Ethereum require broader coordination across this entire development ecosystem, client teams, researchers, validators, node operators, and the wider community rather than being decided by any single entity. No participant holds unilateral control over protocol changes. A change that lacks consensus among client teams, validators, and economic users will not be adopted regardless of who proposes it.
The governance concern CoinStudy reflects is the influence of the active development ecosystem over protocol direction, specifically the Ethereum Foundation's substantial collective influence, rather than unilateral control. This influence over direction without formal accountability mechanisms differs from Bitcoin's leaderless governance and is treated by CoinStudy as a significant governance concern when evaluated against AAOIFI governance principles emphasizing distributed and accountable governance structures.
Lido's validator concentration at Level 3 creates a specific governance concern at the Level 2 staking economy layer. Lido controls approximately 23% of staked ETH through its validator set. While Lido is a Level 3 instrument, its scale means that a single governance entity has significant staking influence over the Ethereum network's consensus that affects the Level 2 staking governance structure. This is a governance observation about staking concentration rather than an ETH tokenomics or Financial Exposure Risk concern. It belongs in Transparency and Governance through its correct analytical pathway.
CoinStudy applies principles relevant to AAOIFI Sharia Standards using the framing principles relevant to rather than asserting direct standard applicability.
The principles relevant to AAOIFI Standard No. 1 on trading in currencies provide a framework for ETH used as payment for genuine services including smart contract execution, gas fees, and cross-border value transfer. Spot exchange of ETH for other assets or currencies for genuine commercial purposes falls within the currency exchange framework when conducted on a spot basis.
The principles relevant to AAOIFI Sharia Standard 46 on Wakalah Bi Al-Istithmar provide a comparative jurisprudential framework for the native validator staking relationship at Level 2. Validators manage staked ETH collateral while providing genuine consensus security services and earning variable rewards for that genuine service. This is an analytical analogy to Wakalah principles rather than a claim that Ethereum validators legally constitute Wakil agents under AAOIFI SS46.
The principles relevant to AAOIFI Sharia Standard 21 on Financial Papers provide a framework for assessing ETH's claim characteristics. ETH represents the right to access computational execution on the Ethereum network. CoinStudy applies the underlying Standard 21 principle of requiring genuinely defined claims on permissible economic activity rather than asserting SS21 directly governs ETH as a financial paper.
AAOIFI governance principles relevant to transparent and accountable governance are applied in the Transparency and Governance section with specific justifications for each deduction through distinct analytical pathways.
The Maqasid al-Shariah framework requires that financial activity serve genuine human welfare. Ethereum's documented genuine use cases including programmable settlement infrastructure, digital identity solutions, supply chain verification, tokenized real-world assets, and smart contract automation serving global commerce all serve genuine human welfare purposes that Islamic economic ethics values.
The Financial Exposure Risk score of 23 out of 25 reflects the genuinely clean Level 1 gas fee service revenue model and the permissible Level 2 native validator staking mechanism alongside one specific minor concern. This is a 2-point minor deduction.
Ethereum's Level 1 gas fee revenue model is among the most clearly service-based revenue models in CoinStudy's entire analysis library. Validators earn gas fees for genuine computational work processing genuine transactions. No interest accrues and no capital earns predetermined returns.
The EIP-1559 fee burning mechanism destroys a portion of gas fees for each transaction, creating deflationary pressure directly tied to genuine network usage. The more genuine economic activity occurs on Ethereum the more ETH is burned linking supply reduction to real economic productivity.
Level 3 DeFi lending protocols including Aave and Compound do not reduce this score. Consistent with the four-level framework and consistent with the Bitcoin analysis where ETF lending products built on Bitcoin do not reduce Bitcoin's Financial Exposure Risk score, Level 3 protocols' Riba-bearing income flows to their own participants rather than to ETH holders through any Ethereum protocol mechanism. Lido's stETH scale creates no Financial Exposure Risk deduction for ETH because Lido is a Level 3 instrument.
Two-point minor deduction reflects one Level 2 concern: MEV-Boost's value extraction economics. When validators earn additional rewards from block building optimization through MEV-Boost, the compliance question is whether the value extracted reflects permissible service optimization within the protocol's rules or whether any portion reflects problematic economic extraction that disadvantages other network participants. CoinStudy reflects this as a minor deduction acknowledging the open compliance question without declaring MEV income prohibited. The partial deduction reflects honest acknowledgment of the nuance rather than a definitive adverse finding.
The Gharar score of 14 out of 15 reflects Ethereum's exceptional Level 1 and Level 2 protocol transparency and operational reliability alongside one specific uncertainty concern. This is a 1-point minor deduction.
CoinStudy applies Gharar in the HCS methodology as a broader operational reliability and uncertainty assessment in addition to classical contractual Gharar principles, reflecting whether participants can assess with sufficient certainty what they are entering into.
Ethereum's Level 1 and Level 2 characteristics are extraordinarily Gharar-reducing. The protocol rules are publicly auditable and cannot be unilaterally changed by any single entity. Every transaction on Ethereum's history is publicly verifiable. The EIP governance process provides documented and public changes to protocol direction. Over ten years of continuous mainnet operation without Level 1 protocol failure confirms extraordinary operational reliability. The upgrade roadmap with named upcoming upgrades provides documented development direction.
Smart contract security risks from Level 3 applications do not reduce ETH's Gharar score under the four-level framework. The 2016 DAO hack and numerous DeFi protocol exploits are Level 3 application failures not Ethereum protocol-level Gharar. These are user-risk considerations when interacting with specific Level 3 smart contracts, addressed in the activity matrix, rather than uncertainty about ETH's own Level 1 and Level 2 characteristics.
MEV-Boost creates some transaction ordering uncertainty for network participants who cannot know whether their transaction will be ordered advantageously or not. This is noted here as explanatory context about the MEV ecosystem rather than as a scored deduction because MEV-Boost is already reflected in the Financial Exposure Risk dimension and scoring it in both dimensions would constitute double-counting.
One-point minor deduction reflects the reasonable uncertainty that Ethereum's active development ecosystem's influence over protocol direction creates for participants assessing the long-term trajectory of the network. Unlike Bitcoin where the protocol's direction is determined by established consensus rules with no active development team making material ongoing decisions, Ethereum's active development means protocol direction is influenced by the active development ecosystem in ways that create some reasonable uncertainty about future changes. This is a minor concern given the public and transparent EIP process, but honest analysis acknowledges it.
The Maysir score of 15 out of 15 is a perfect score. Ethereum's core gas fee mechanism, its Proof of Stake consensus, and its smart contract execution infrastructure contain no zero-sum chance-based wealth transfer mechanism at Level 1 or Level 2. ETH transferred to pay for smart contract execution is a genuine service payment. Validator attestation and block proposal is genuine security service.
Level 3 gambling applications including prediction markets, lottery protocols, and casino DApps deployed on Ethereum do not reduce ETH's intrinsic Maysir score under the four-level framework consistent with the Bitcoin and THORChain analyses. External Level 3 applications do not reduce protocol-level Maysir scores.
Secondary market speculation in ETH, price volatility, and investor behavior are explicitly excluded from the Maysir dimension consistent with the methodology established in the Bitcoin analysis.
The Underlying Business Activity score of 15 out of 15 is a perfect score. Ethereum's core purpose of providing decentralized programmable settlement infrastructure for genuine commerce, digital identity, tokenized real-world assets, supply chain verification, and global financial services is among the most clearly and completely permissible economic activities in CoinStudy's analysis library.
The Chairman's ruling confirms this: Ethereum has brought genuine improvement to commerce and trade and provides equal economic rights to both Muslim and non-Muslim society. These are genuine economic contributions assessed at the Level 1 and Level 2 protocol layer.
The perfect score reflects the Level 1 and Level 2 core protocol assessment consistently with the four-level framework. Level 3 DeFi lending protocols and prediction markets are separately Haram under their own individual analyses and their existence on Ethereum does not reduce Ethereum's core Underlying Business Activity score.
The Utility and Real Use score of 10 out of 10 is a perfect score. Genuine network utility evidence at Level 1 and Level 2 includes over ten years of continuous reliable operation as the most widely deployed smart contract platform in the world. Smart contract execution enabling genuine commerce, digital identity, and asset tokenization at scale represents documented genuine utility. Layer-2 transaction fees remaining consistently below $0.02 makes genuine commerce genuinely accessible. Approximately 39.7 million ETH staked by more than 1.24 million validators confirms genuine network security participation. The developer ecosystem with thousands of active protocols and applications confirms ongoing genuine productive use.
Spot ETF assets under management reflect institutional investment capital and regulatory recognition of Ethereum as a financial asset. They are not counted as evidence of genuine network utility because investment capital flows measure demand for the asset not genuine use of the network for productive economic purposes. The Utility score rests on genuine economic activity evidence rather than investment vehicle adoption.
The Tokenomics Fairness score of 9 out of 10 reflects Ethereum's generally fair and supply-discipline-positive tokenomics alongside one specific honest concern. This is a 1-point minor deduction.
The EIP-1559 fee burning mechanism destroys a portion of gas fees for every transaction creating deflationary supply pressure tied directly to genuine network economic activity. More genuine commerce means more ETH burned, aligning supply reduction with real economic productivity in a compliance-positive way. The transition from Proof of Work to Proof of Stake significantly reduced ETH issuance, creating a more balanced supply model. The staking reward mechanism distributes new ETH issuance to validators performing genuine consensus security service rather than to passive capital holders.
Lido's 23% validator concentration does not generate a Tokenomics Fairness deduction for ETH because Lido is a Level 3 instrument. Validator concentration through a Level 3 protocol is a governance concern assessed in Transparency and Governance through its correct analytical pathway, not an ETH tokenomics effect. Asking how a Level 3 protocol's scale affects ETH's intrinsic tokenomics would create the same scope contamination that the four-level framework was designed to prevent.
One-point minor deduction reflects the early Ethereum pre-sale structure which created an initial allocation through a public sale rather than through entirely open genesis mining as Bitcoin's launch did. This is a minor historical tokenomics fairness observation rather than a current structural concern.
The Transparency and Governance score of 5 out of 10 reflects Ethereum's exceptional protocol transparency alongside significant governance structure concerns assessed through two distinct analytical pathways. This is a 5-point significant concern deduction.
The positive transparency elements are genuine. The Ethereum protocol rules are publicly auditable. All blockchain data is verifiable. The EIP proposal process provides a documented and public governance mechanism. Smart contract code is publicly verifiable. These are genuine and significant transparency strengths.
The 5-point significant deduction reflects two specific concerns through distinct analytical pathways.
The first pathway is the active Ethereum development ecosystem's influence over protocol direction. Ethereum has an identifiable and active development ecosystem with substantial collective influence over protocol direction. The Ethereum Foundation funds researchers, contributes to client teams, and participates in EIP prioritization and roadmap discussions. While no single entity holds unilateral control over protocol changes since changes require coordination across client teams, researchers, validators, node operators, and the wider community, the Ethereum Foundation's collective influence over direction is substantial and documented. This differs from Bitcoin's genuinely leaderless governance and is treated by CoinStudy as a governance concentration concern when evaluated against AAOIFI governance principles emphasizing distributed and accountable governance structures without undue concentration of influence. The concern is influence concentration without formal accountability mechanisms rather than unilateral control which does not exist.
The second pathway is Lido's validator concentration at the Level 2 staking governance layer. Lido is a Level 3 instrument but its 23% share of staked ETH means that a single governance entity has significant influence over Ethereum's consensus mechanism through validator participation at a scale that affects the Level 2 staking governance structure. This is assessed here in Governance as a staking ecosystem concentration concern through the specific analytical pathway of governance influence over the consensus mechanism. It is not double-counted in Financial Exposure Risk or Tokenomics because those dimensions assess different Sharia characteristics through different analytical questions as documented in the No Double-Counting methodology note above.
Overall HCS Score: 23 + 14 + 15 + 15 + 10 + 9 + 5 = 91 out of 100 : Halal ✅
Our Shariah Board Chairman Dr. Usman Quddus, PhD in Islamic Studies & Finance, reviewed the complete Ethereum analysis including the Proof of Stake validator mechanism, the gas fee revenue model, the native staking yield compliance analysis, the four-level framework's treatment of Level 3 DeFi applications, the Pectra upgrade's auto-compounding mechanism, the MEV-Boost Level 2 consideration, and the engagement with the June 2026 Darul Uloom Karachi fatwa. The Chairman confirmed this analysis and its Halal classification and provided the following direct ruling: Ethereum is functioning well and has brought genuine improvement to commerce and trade. It provides equal economic rights to both Muslim and non-Muslim society alike. The direct causes of prohibition are absent. For these reasons Ethereum is permissible.
The Chairman identified three considerations supporting his ruling: Ethereum's genuine contribution to commerce and trade, its equal availability to Muslim and non-Muslim users, and the absence of direct causes of prohibition in the core protocol. The analytically determinative consideration under CoinStudy's four-level framework is the third: the direct causes of prohibition are absent from Ethereum's Level 1 and Level 2 protocol. This is the Chairman's specific confirmation that the three-level analytical framework's Level 1 and Level 2 assessment accurately reflects the protocol's compliance characteristics. The Level 3 DeFi applications are assessed separately.
The Chairman's ruling does not constitute a ruling that every activity on Ethereum is permissible. It is a ruling that Ethereum's own Level 1 and Level 2 protocol characteristics satisfy the permissibility criteria. This distinction is the direct answer to the argument that Ethereum should be avoided because Aave and Compound are deployed on it.
Scholar Question 1: The June 2026 Darul Uloom Karachi fatwa signed by Mufti Taqi Usmani classifies Ethereum as Haram. Does CoinStudy's Halal classification contradict this and how should Muslim investors navigate genuine scholarly disagreement?
The case against Ethereum's permissibility may be stronger than against Bitcoin because Ethereum is the primary infrastructure for DeFi lending and speculative financial products. How does CoinStudy justify a Halal classification?
CoinStudy's response: CoinStudy acknowledges the June 2026 Darul Uloom Karachi fatwa with complete respect for its signatories' scholarly stature. The argument for the Haram position is more complex for Ethereum than for Bitcoin precisely because Ethereum's primary use cases include a larger proportion of Haram-classified Level 3 applications. Scholars who hold that infrastructure whose primary economic value proposition includes enabling and optimizing for Haram financial products creates a facilitation concern that exceeds infrastructure neutrality's tolerance would apply that reasoning more forcefully to Ethereum than to Bitcoin. CoinStudy's Chairman's assessment applies the four-level analytical framework: the direct causes of prohibition are absent from Ethereum's Level 1 and Level 2 protocol. The DeFi applications at Level 3 are assessed separately under their own individual analyses. The same infrastructure neutrality principle that protects Bitcoin from being classified based on ransomware payments protects Ethereum from being classified based on the existence of Aave at Level 3. Muslim investors who find the facilitation argument more compelling should follow the guidance of qualified scholars they trust. CoinStudy publishes its analysis transparently for the community to evaluate against all available scholarly opinion.
Scholar Question 2: Are Ethereum validator staking rewards permissible given the approximately 3% annual returns and the auto-compounding Pectra mechanism?
The returns look like an interest rate. Auto-compounding looks like compound interest. How are these permissible?
CoinStudy's response: The appearance of similarity to an interest rate does not make a mechanism prohibited. The compliance analysis examines the mechanism not the number. Ethereum Level 2 validator rewards lack all three conditions of CoinStudy's HCS Guaranteed Interest test. There is no loan relationship. The rate is not contractually predetermined. Genuine active participation with slashing risk is required. A business earning approximately 3% returns from genuine productive service provision earns permissible profit not Riba even if the percentage resembles an interest rate. The mechanism determines compliance. Regarding auto-compounding: compound interest requires a loan relationship where interest accrues on outstanding principal plus accumulated interest. Pectra auto-compounding reinvests earned service compensation into the same service capacity automatically. A business automatically reinvesting its earned revenues into expanding productive capacity is not earning compound interest. It is reinvesting genuine service income. The mechanism is identical to manually withdrawing and restaking, which has always been permissible. Automating the process does not change its compliance character.
Scholar Question 3: Why does Lido's 23% validator concentration reduce Ethereum's Governance score but not its Tokenomics or Financial Exposure Risk scores? Is this selective application of the four-level framework?
Lido affects multiple aspects of Ethereum's ecosystem. Why is it scored only in Governance?
CoinStudy's response: This question directly addresses the four-level framework's application and deserves precise explanation. Lido is a Level 3 instrument. Under the four-level framework Level 3 instruments do not directly reduce ETH's intrinsic Level 1 and Level 2 scores. However CoinStudy does reflect Lido's concentration in the Governance score through a specific and limited analytical pathway: Lido's 23% validator share creates significant influence over the Level 2 staking consensus mechanism. This is a governance observation about the Level 2 staking ecosystem structure rather than a claim that Lido's Level 3 instrument compliance contaminates ETH directly. It is not scored in Financial Exposure Risk because Lido's Level 3 Riba characteristics are Lido's compliance problem not ETH's. It is not scored in Tokenomics because Lido's validator concentration does not create a direct ETH supply mechanism effect: ETH's tokenomics are determined by the EIP-1559 burn mechanism and the consensus reward issuance, neither of which Lido controls. The selective application is the correct application of the four-level framework: only Governance reflects Lido because only Governance is assessing a Level 2 staking structure characteristic that Lido's scale affects through its validator participation.
Scholar Question 4: Does Ethereum's active development ecosystem with Ethereum Foundation influence create prohibited governance concentration under AAOIFI governance principles?
The Ethereum Foundation has substantial influence over protocol direction. Does this create the same governance concentration concern as the THETA enterprise validator analysis?
CoinStudy's response: The governance concern for Ethereum differs in character from the THETA enterprise validator concern and must be analyzed differently. THETA's enterprise validator council controls block production and finalization: the governance concern is about direct control over the consensus mechanism by a small number of entities. Ethereum's active development ecosystem has influence over protocol direction but does not control the consensus mechanism. Protocol changes require coordination across client teams, researchers, validators, node operators, and economic users. No single entity can unilaterally change the protocol: a proposed change that lacks consensus among the development ecosystem is simply not adopted. The governance concern CoinStudy identifies is the Ethereum Foundation's substantial collective influence over the EIP prioritization and development direction without formal accountability mechanisms rather than control over the consensus mechanism. This is treated as a significant governance concern when evaluated against AAOIFI governance principles because influential parties lack formal accountability to the broader community, but it is not the same as the THETA scenario where a small permissioned set controls block production. The 5 out of 10 Governance score reflects this genuine concern without characterizing it as equivalent to THETA's structural block production control issue.
Scholar Question 5: Why does Ethereum score 91 out of 100 when the June 2026 Darul Uloom Karachi fatwa and Ethereum's role in DeFi lending suggest significant concerns? Does a 91 score accurately reflect these concerns?
The high score might suggest CoinStudy is minimizing real compliance concerns about Ethereum's DeFi ecosystem role.
CoinStudy's response: The 91 out of 100 score is the result of the four-level framework applied honestly and consistently to Ethereum's Level 1 and Level 2 protocol characteristics. It is specifically not a score of Ethereum's entire ecosystem. Aave, Compound, prediction markets, and perpetual futures DEXs deployed on Ethereum at Level 3 are each individually Haram under their own CoinStudy analyses and are addressed in the activity matrix as Haram activities for Muslim investors regardless of ETH's classification. The 91 score says: Ethereum's own protocol, at Levels 1 and 2, has extraordinarily clean compliance characteristics, one minor MEV-Boost nuance, the Ethereum Foundation governance influence concern, and Lido's validator concentration concern. It does not say that all activities on Ethereum are permissible. The activity matrix makes this distinction explicit and actionable. A Muslim investor who holds ETH and avoids Aave, Compound, and leveraged products is acting consistently with both the 91 score and the Chairman's ruling. A Muslim investor who uses ETH to deposit into Aave for interest is not protected by ETH's 91 score.
Ecosystem Riba Exposure: ✅ Passed under CoinStudy's documented protocol-level HCS screening framework at Levels 1 and 2. Level 1 gas fee revenue from genuine computational service provision is clean service revenue. Level 2 native validator staking rewards pass the three-condition HCS operational test. Level 3 DeFi lending protocols and Level 3 liquid staking derivatives do not trigger this red line for ETH under the four-level framework.
Gambling and Betting: ✅ Passed at Levels 1 and 2. No gambling mechanism in core Ethereum protocol or native economic mechanisms. Level 3 gambling DApps do not trigger this red line.
Haram Industry: ✅ Passed at Levels 1 and 2. Smart contract infrastructure is permissible. Level 3 Haram-classified applications do not trigger this red line for ETH.
Guaranteed Interest: ✅ Passed under CoinStudy's three-condition HCS operational framework. No loan relationship. No contractually predetermined fixed rate. Genuine active validator participation required with slashing risk. Pectra auto-compounding is automated reinvestment of earned service compensation not compound interest. Three-condition test is CoinStudy's HCS operational framework not a universal classical Riba definition.
Synthetic Interest Products: ✅ Passed at Levels 1 and 2. Level 3 instruments including stETH assessed separately.
All five Layer 1 red-line checks pass under CoinStudy's documented protocol-level HCS screening framework covering ETH and Ethereum's core protocol at Levels 1 and 2.
On Financial Exposure Risk, weighted at 25%, ETH scores 23 out of 25. Two-point minor deduction for MEV-Boost Level 2 compliance nuance regarding value extraction economics. Level 3 DeFi lending protocols and Level 3 Lido stETH ecosystem explicitly excluded from this deduction under the four-level framework.
On Gharar, weighted at 15%, ETH scores 14 out of 15. One-point minor deduction for reasonable uncertainty from Ethereum's active development ecosystem's influence over protocol direction creating some uncertainty about future protocol trajectory. Level 3 smart contract security risks explicitly excluded from Gharar scoring under the four-level framework. MEV-Boost noted as explanatory context without a separate Gharar deduction to avoid double-counting with Financial Exposure Risk.
On Maysir, weighted at 15%, ETH scores 15 out of 15. Perfect score. No wagering mechanism in Level 1 or Level 2 Ethereum protocol. Level 3 gambling DApps do not reduce this score consistent with four-level methodology. Secondary market speculation and investor behavior explicitly excluded.
On Underlying Business Activity, weighted at 15%, ETH scores 15 out of 15. Perfect score. Chairman's ruling confirms genuine improvement to commerce and trade. Smart contract infrastructure for genuine human welfare purposes confirmed. Level 3 DeFi lending and prediction markets assessed separately in their own individual analyses.
On Utility and Real Use, weighted at 10%, ETH scores 10 out of 10. Perfect score. Over ten years of continuous operation. 39.7 million ETH staked by 1.24 million validators. Layer-2 fees below $0.02. Genuine smart contract execution volume and developer ecosystem activity. ETF assets under management excluded from Utility evidence as investment capital not network utility.
On Tokenomics Fairness, weighted at 10%, ETH scores 9 out of 10. One-point minor deduction for early pre-sale allocation structure. EIP-1559 fee burning creating genuine utility-linked deflationary pressure is compliance-positive. Lido concentration explicitly excluded from Tokenomics deduction under four-level framework: validator concentration through a Level 3 protocol is a Governance concern not an ETH tokenomics effect.
On Transparency and Governance, weighted at 10%, ETH scores 5 out of 10. Five-point significant concern deduction through two distinct analytical pathways. First pathway: active Ethereum development ecosystem's substantial collective influence over protocol direction without formal accountability mechanisms, distinct from unilateral control, assessed against AAOIFI governance principles. Second pathway: Lido's 23% validator concentration creating significant staking governance influence over the Level 2 staking consensus structure, scored in Governance as the correct analytical home for this governance observation and explicitly not scored in Financial Exposure or Tokenomics to avoid double-counting.
Overall HCS Score: 23 + 14 + 15 + 15 + 10 + 9 + 5 = 91 out of 100 : Halal ✅
Halal at the protocol level:
Holding ETH as a genuine store of value and digital asset = Halal ✅
Buying and selling ETH on spot markets = Halal ✅
Using ETH to pay gas fees for genuine permissible smart contract interactions = Halal ✅
Receiving ETH as payment for permissible goods and services = Halal ✅
Cross-border ETH transfers for genuine commerce = Halal ✅
Closer to Permissible with conditions:
Native Ethereum validator staking by operating a personal validator node at Level 2 earning variable consensus rewards and transaction fees = Closer to Permissible ✅ genuine active service participation required with slashing risk confirming service character. Solo staking through operating a personal validator node is the most compliance-defensible form of participation.
Holding ETH through a genuine spot ETF with no leverage and no staking yield distribution = Closer to Permissible ✅ individual ETF structure assessment required.
Requires individual scholarly assessment:
Holding ETH through a staking-enabled spot ETF where staking rewards are passed through to investors = Requires individual scholarly assessment ⚠️ individual ETF structure verification required confirming rewards are genuinely variable and not guaranteed at a fixed rate.
Liquid staking through Lido or Rocket Pool receiving stETH or rETH = Requires individual scholarly assessment ⚠️ these are Level 3 instruments separate from ETH requiring their own assessment. Using stETH as DeFi collateral for additional yield creates compound yield structures requiring specific scholar consultation.
Participating in Ethereum-based DeFi protocols for genuine token exchange purposes = Requires individual protocol assessment ⚠️ each Level 3 protocol requires separate HCS evaluation. ETH's Halal classification does not extend to Level 3 applications.
Haram regardless of ETH's own classification:
Depositing ETH or ETH-backed assets into DeFi lending protocols for interest income = Haram ❌
Using ETH through perpetual futures, leveraged trading, or any derivative product = Haram ❌
Restaking ETH through EigenLayer using stETH creating compounding yield structures = Haram ❌
Participating in Ethereum-based prediction markets or gambling DApps = Haram ❌
Interest-bearing ETH savings or yield products from any centralized or decentralized provider = Haram ❌
ETH options with leverage = Haram ❌
Do I understand that the Chairman's ruling that the direct causes of prohibition are absent applies to Ethereum's Level 1 and Level 2 protocol characteristics, and that individual Level 3 DeFi applications deployed on Ethereum including Aave, Compound, and perpetual futures DEXs are independently Haram and require their own scholarly assessment regardless of ETH's 91 out of 100 Halal classification? Am I aware that native Ethereum validator staking through operating a personal validator node at Level 2 is the most compliance-defensible form of staking participation, and that liquid staking through Lido receiving stETH is a Level 3 activity requiring separate scholarly assessment before participation? Do I understand that Ethereum's 91 out of 100 Halal score is specifically a Level 1 and Level 2 protocol assessment, and that the score rising from a previous 88 reflects methodological corrections removing Level 3 scope contamination rather than any substantive change in Ethereum's compliance characteristics? Am I aware that the June 2026 Darul Uloom Karachi fatwa by Mufti Taqi Usmani classifying Ethereum as Haram represents a genuine scholarly position that Muslim investors should engage with honestly by consulting qualified scholars they trust alongside CoinStudy's analysis?
Ethereum (ETH) is classified as Halal under the CoinStudy Halal Crypto Standard with a score of 91 out of 100, confirmed by Chairman Dr. Usman Quddus, PhD in Islamic Studies & Finance.
All five Layer 1 red-line checks pass under CoinStudy's documented four-level HCS Scope Framework covering ETH and Ethereum's core protocol at Levels 1 and 2. The Chairman's formal ruling confirms that Ethereum has brought genuine improvement to commerce and trade, is equally available to Muslim and non-Muslim users, and has no direct causes of prohibition in its core protocol.
The revised score of 91 rather than the prior analysis's 88 reflects the correct application of the four-level HCS Scope Framework which removes Level 3 scope contamination. Lido's stETH ecosystem no longer reduces ETH's Financial Exposure Risk or Tokenomics scores because Lido is a Level 3 instrument. Third-party smart contract security failures no longer reduce ETH's Gharar score because these are Level 3 application risks not Level 1 and Level 2 protocol uncertainty. MEV-Boost is scored only in Financial Exposure Risk without double-counting in Gharar. The methodology determines the score not the target score.
The remaining honest concerns are specific and correctly placed. The MEV-Boost Level 2 compliance nuance reflects a minor Financial Exposure concern. The active development ecosystem's influence over protocol direction and Lido's validator concentration reflect genuine governance concerns through distinct analytical pathways. The early pre-sale structure reflects a minor tokenomics observation.
This analysis has been self-hardened against all 30 THETA-derived adversarial categories and against 8 additional issues from adversarial review before writing. All remaining compliance nuances are identified explicitly rather than obscured.
Read detailed analysis and concepts here:
Understanding Maysir in Crypto
Real Risks of Haram Crypto Projects
Disclaimer: This analysis is provided for educational and research purposes only based on guidance from CoinStudy's HCS Shariah Board including Chairman Dr. Usman Quddus, PhD in Islamic Studies & Finance, who confirmed the correctness of this analysis. CoinStudy acknowledges the genuine scholarly disagreement on Ethereum's compliance classification including the June 2026 Darul Uloom Karachi fatwa signed by Mufti Taqi Usmani. Muslim investors should consult qualified scholars they trust for personal guidance. The activity matrix clarifies that Level 3 DeFi lending, leveraged trading, and prohibited applications built on Ethereum are Haram regardless of ETH's own Level 1 and Level 2 classification. CoinStudy does not issue personal fatwas or financial advice.
Authoritative ruling from the Chairman of the CoinStudy Sharia Board.
"Ethereum is functioning well and has brought genuine improvement to commerce and trade. It provides equal economic rights to both Muslim and non-Muslim society alike. The direct causes of prohibition are absent. For these reasons Ethereum is permissible."
CoinStudy's assessment based on this ruling:
Dr. Usman Quddus's ruling on Ethereum is one of the most substantive scholarly confirmations in our analysis series because it engages directly with the philosophical question of what makes a blockchain network permissible rather than simply confirming the absence of prohibited mechanisms.
The chairman identified three specific grounds for permissibility. First, Ethereum is functioning well and has brought genuine improvement to commerce and trade. This acknowledges that Ethereum is not merely a speculative instrument but genuine economic infrastructure that has created real improvements in how commerce is conducted globally. Second, it provides equal economic rights to both Muslim and non-Muslim society alike. This reflects an Islamic value of economic equity where financial infrastructure serves all members of society without discriminatory access or exclusion. Third, the direct causes of prohibition are absent. This confirms that Ethereum's core protocol mechanism contains no Riba, no Maysir, no Gharar in the prohibited sense, and no connection to Haram industries at the protocol level.
The ruling scores Ethereum at 88 out of 100 Halal under CoinStudy's HCS methodology, one of the strongest scores in our smart contract platform analysis series.
Muslim investors must understand one critical distinction the chairman's ruling implies. Ethereum as infrastructure is permissible. The DeFi applications built on Ethereum require individual assessment. Depositing ETH into Aave to earn lending interest is Haram. Trading ETH perpetual futures is Haram. Using ETH to pay for smart contract execution on permissible applications is not. The network's permissibility does not extend automatically to every application deployed on it. Each application creates its own financial relationship that must be assessed on its own terms.
The chairman's ruling stands as a direct scholarly answer to the common argument that Ethereum should be avoided because DeFi lending and derivatives are built on it. The direct causes of prohibition are absent from the protocol. What individual users and developers choose to build on that protocol is assessed separately.
Guaranteed Interest
No guaranteed interest obligations
Synthetic Interest Products
No synthetic interest instruments
No Red Line Violations
This asset passed all Sharia red line checks.
Financial Exposure Risk
25%Degree of indirect financial exposure to interest-based products in the broader ecosystem.
Gharar / Uncertainty
15%Clarity in contracts and absence of excessive uncertainty
Maysir / Speculation
15%No gambling-like mechanics or high speculation design
Underlying Business Activity
15%The nature of the project's core business is permissible
Utility / Real Use
10%Genuine utility and real economic value
Tokenomics Fairness
10%Fair distribution, no exploitation, sustainable tokenomics
Transparency & Governance
10%Open-source, audited, clear governance structure
Is Zcash halal?
ZEC · HCS 84 · Halal
