Islamic Finance Principles Assessment
Riba — Does Euler involve interest?
Euler is, at its core, an interest-based lending and borrowing protocol: borrowers pay interest and depositors earn yield denominated in that interest. This is not a peripheral feature but the entire business model of the vaults. For Muslim investors, this places EUL and its underlying protocol activity in a category requiring serious caution, as riba is embedded in the fundamental mechanics rather than in an optional add-on.
Assessment: Riba Dominant
Score: 29.8/100
Our methodology examines 10 criteria to evaluate how well Euler avoids interest-based mechanisms.
Euler's protocol revenue is generated directly from borrower interest, liquidation penalties, and swap fees across its credit vaults — a textbook interest-based lending model. Roughly 90% of vault fees flow to depositors as yield, with the remainder split between vault curators and the DAO treasury. Non-EUL fees are periodically auctioned through "Fee Flow," where bidders pay EUL that accrues to the treasury. Because the underlying revenue source is interest on loans, both the lender's yield and the treasury's accumulated EUL are traceable to riba, regardless of the sophistication of the auction mechanism layered on top.
Reward flows described in the sources — Fee Flow auction proceeds and gauge-directed incentive emissions — are variable and usage-dependent rather than fixed-rate obligations, which is a mitigating structural feature compared to a guaranteed-return product. However, this variability does not change the source: incentives and rewards ultimately trace back to borrower interest payments generated within the vaults. "Staking gauges" that direct emissions to specific markets are governance tools sitting atop an interest-generating base layer, so even variable, market-based reward distribution does not remove the underlying riba exposure of the revenue itself.
Gharar — How much uncertainty does Euler involve?
Uncertainty around Euler is moderated by strong transparency but is not eliminated. A named, credentialed team and extensive audit history reduce ambiguity, while a major historical exploit and thin documentation of the staking mechanism keep meaningful uncertainty in play. On balance, informational gharar is lower than for anonymous projects but not negligible.
Assessment: Moderate Gharar (Material Uncertainty)
Score: 51.1/100
Our methodology examines 15 criteria including team transparency, audit quality, and governance.
Euler's team is fully identified: CEO Michael Bentley (a former Oxford postdoctoral researcher in evolutionary game theory), with co-founders Doug Hoyte and Jack Prior, and staff drawn from Goldman Sachs and the NY Fed. Institutional backers include Lemniscap, Paradigm and Haun Ventures. Bentley has publicly disclosed personal losses from a lost private key, a transparency signal rather than a red flag. Code and documentation are open-source on GitHub. This level of named accountability and disclosure meaningfully reduces the informational uncertainty typically associated with anonymous or opaque crypto projects.
Euler has been reviewed extensively — Certora, Trail of Bits, Halborn, Solidified, Sherlock, Omniscia, QuillAudits, Cantina, Spearbit, and others, totaling over 60 reviews from 2021 through 2026. Despite this density, the protocol suffered a $197M exploit in March 2023, the largest DeFi hack of that period, showing audits reduce but do not eliminate technical risk. Separately, the "staking gauge" feature lacks dedicated documentation on lock-up periods, custody model, or slashing conditions, leaving a real, named gharar gap around how any staking-type rewards actually function in practice.
Maysir — Does Euler involve gambling or speculation?
Euler is not designed as a betting or lottery mechanism; it functions as lending infrastructure with genuine borrower and lender use cases. Speculative trading of EUL on secondary markets exists, as with virtually any listed token, but this is a market behavior distinct from the protocol's own design. The primary Shariah concern for Euler lies elsewhere (riba), not in maysir.
Assessment: Maysir / Qimar (Gambling)
Score: 46.1/100
Our methodology examines 11 criteria to determine whether Euler is a gambling instrument or a genuine economic tool.
Euler provides real economic utility: it lets users create isolated, permissionless lending markets for a wide range of ERC-20 assets, enabling collateralized borrowing and yield generation for depositors. Growth from roughly $189M to over $2.9–3.15B in TVL through 2025, with active loans surpassing $1.4B, reflects genuine usage by borrowers and liquidity providers rather than pure speculative churn. This productive, service-based function — facilitating credit markets — distinguishes Euler's core design from a gambling or zero-sum wagering mechanism, even though its revenue model raises separate riba concerns.
Weighed against this utility, EUL trades actively on secondary markets, and its value is tied to governance rights and a claim on Fee Flow proceeds rather than a stable asset-backed peg, which invites speculative price behavior typical of most governance tokens. This speculative trading is a feature of open crypto markets generally, not something Euler's protocol is designed to encourage, and per the framework used here, third-party speculative misuse should not itself drive the maysir assessment toward impermissibility. The protocol's underlying utility remains genuine and substantive.
The Full 27-Point Screening
1. Legitimacy (4 criteria)
| Criterion | Score | Analysis |
|---|
| Team Transparency | 82/100 | Founders (Bentley, Hoyte, Prior) are named, credentialed, and traceable across multiple public profiles and interviews. |
| Fraud & Scam Risk | 55/100 | A major $197M hack occurred in 2023, though funds were largely voluntarily returned and no rug-pull or fraud indicators are present. |
| Use Case Legitimacy | 82/100 | Euler is an active, widely-used lending/borrowing infrastructure protocol with real TVL, users and integrations, not a hype-only asset. |
| Ethical Practices | 40/100 | The protocol's own core business is interest-based lending rather than a prohibited sector like gambling or alcohol, but its foundational mechanism is interest itself, a structural concern addressed further under interest-specific criteria. |
Summary: Euler has a named, credentialed founding team and institutional backers, but suffered a major 2023 hack whose funds were largely recovered, and no meme-coin characteristics are present.
2. Project Operations (9 criteria)
| Criterion | Score | Analysis |
|---|
| Core Protocol Business | 20/100 | The base protocol's core business is interest-bearing lending and borrowing, which is the central Shariah concern here. |
| Transaction Fees | 25/100 | Fees are interest payments, liquidation penalties and swap fees auctioned via Fee Flow into EUL for the DAO treasury rather than being purely burned or fairly redistributed. |
| Treasury Assets | 55/100 | Treasury temporarily holds stablecoin fees pre-auction and accumulated EUL, but sources do not clearly disclose whether any interest-bearing instruments are held beyond this. |
| Revenue Model | 20/100 | Revenue is generated directly from borrower interest payments, liquidation penalties and swap fees, i.e., interest-based income. |
| Transparency | 88/100 | Code, whitepapers, and audit reports are openly published on GitHub and official docs. |
| Governance | 42/100 | Governance is DAO/1-EUL-1-vote based, but initial allocation data shows insiders/investors held a large majority of supply, indicating meaningful centralization risk. |
| Launch Fairness | 25/100 | Only about 1% of supply went to a soft-launch airdrop while the large majority was allocated to investors, Labs shareholders, employees and partners under vesting. |
| Token Distribution | 35/100 | Distribution data shows roughly 60%+ of supply concentrated among insiders/investors versus a smaller community/user allocation. |
| Speculation/Utility Ratio | 60/100 | EUL carries real governance and fee-auction utility, though trading/liquidity commentary suggests meaningful speculative activity alongside utility use. |
Summary: Euler is a modular, open-source, permissionless lending protocol with DAO governance, though token distribution was insider/investor-heavy rather than a broad fair launch.
3. Financial Health (4 criteria)
| Criterion | Score | Analysis |
|---|
| Protocol Revenue | 20/100 | Protocol revenue is fundamentally interest-derived from borrowers. |
| Financial Status | 75/100 | TVL and revenue show strong growth trends through 2025 based on multiple independent reports. |
| Interest Assessment | 12/100 | The protocol's fundamental function is interest-bearing lending and borrowing with per-second compounding interest, a core riba structure. |
| Audit Quality | 78/100 | Over 60 audits by more than 16 named firms (Certora, Trail of Bits, Halborn, Sherlock, etc.) are documented with dates, though a hack occurred despite this coverage. |
Summary: The protocol generates growing revenue directly from interest-based lending activity and has been extensively but imperfectly audited, having previously suffered a large exploit despite prior audit coverage.
4. Token Economics (5 criteria)
| Criterion | Score | Analysis |
|---|
| Token Purpose | 72/100 | EUL has genuine functional utility in governance and the Fee Flow auction mechanism, not a meme-only design. |
| Governance Rights | 80/100 | Holders vote 1:1 on DAO proposals including treasury allocation and protocol parameters. |
| Rewards Distribution | 48/100 | Rewards are variable, driven by protocol fee generation and auction/gauge dynamics rather than a fixed guaranteed rate, though the underlying revenue source is interest. |
| Speculation Controls | 25/100 | No explicit anti-speculation mechanisms (limits, anti-whale controls) beyond standard vesting schedules are described in the sources. |
| Asset Backing | 38/100 | EUL's value is tied to governance rights and a claim on Fee-Flow-captured protocol revenue, which is itself interest-derived rather than backed by halal assets. |
Summary: EUL is a utility/governance token with variable, activity-linked rewards via its Fee Flow auction mechanism, but lacks explicit anti-speculation controls and its value ultimately traces back to interest-based protocol revenue.
5. Staking Mechanism (5 criteria)
| Criterion | Score | Analysis |
|---|
| Mechanism Type | 30/100 (low evidence) | Sources mention "staking gauges" but provide no detail on custody model, lock-up terms, or delegation structure. |
| Islamic Contract Classification | 25/100 (low evidence) | No Islamic contract classification of the staking/gauge mechanism is discussed in the sources. |
| Rewards Structure | 35/100 | Rewards appear tied to variable Fee Flow auction proceeds and gauge-directed incentives, but the underlying source is interest revenue and the mechanics are only partially described. |
| Documentation | 20/100 (low evidence) | No dedicated staking documentation, risk disclosures, or terms are identifiable in the sources. |
| Shariah Alignment | 25/100 (low evidence) | The staking/gauge feature's Shariah status cannot be assessed from the sources due to insufficient documentation and an interest-linked reward source. |
Summary: A gauge-based staking-like feature is referenced but remains inadequately documented in the available sources regarding custody, lock-up, and reward mechanics.
Overall Assessment: Euler is a legitimate, actively developed DeFi lending infrastructure project whose core interest-based lending design, rather than fraud or opacity, is the primary Shariah concern.
Written by ThanvirFounder, Ex Director S&P Global Energy
Reviewed by Imam Omar SiddiqiShariah Scholar