Islamic Finance Principles Assessment
Riba — Does Merlin Chain involve interest?
Merlin Chain's base protocol does not itself run interest-based lending; that exists only in third-party dApps (Avalon, Mage, Solv) built atop it. The base chain's own revenue comes from staking, liquidity provision and deposits, redirected largely to token buybacks rather than fixed interest payouts. For Muslim investors, the core protocol is not intrinsically riba-based, though headline "APY/APR" marketing language warrants caution.
Assessment: Minor Riba
Score: 85/100
Our methodology examines 10 criteria to evaluate how well Merlin Chain avoids interest-based mechanisms.
Merlin Chain's stated protocol revenue derives from staking activity, liquidity provisioning and BTCFi ecosystem deposits, with over half directed to MERL buybacks rather than distributed as interest. This buyback-funded model is closer to a profit-allocation mechanism than a debt-interest structure. However, third-party dApps built on the chain (Avalon Finance, Mage Finance, Solv Protocol) explicitly run interest-based BTC and stablecoin lending (9.9% BTC, 2.5-4.3% stablecoin rates). These are separate products users may choose to avoid; they do not make the base Layer-2 protocol itself an interest-bearing instrument, though they merit avoidance individually.
Native MERL staking rewards validators from token emissions for securing consensus via PoS, a legitimate service-based reward rather than a loan of capital for guaranteed interest. However, marketing quotes fairly fixed-sounding figures (12-18% APY, later "45% APR"), which risks resembling a promised return rather than one purely contingent on network performance and emission schedules. The separate "Merlin's Seal" program, where BTC/ETH/BRC-20 assets are locked to mint M-BTC and earn MERL/M-Points, introduces a custodial bridging step; rewards here should be treated as variable network incentives, not a guaranteed yield, and diligence on actual variability is advised.
Gharar — How much uncertainty does Merlin Chain involve?
Merlin Chain carries moderate uncertainty: the founder and company backing are identifiable, but the wider team and treasury details are thin in available disclosures. Genuine mainnet history and audits reduce ambiguity, while unrelated "Merlin"-named projects (including one tied to a documented 2023 rug pull) create naming confusion investors must carefully avoid conflating. On balance, uncertainty is manageable but not negligible.
Assessment: Moderate Gharar (Material Uncertainty)
Score: 54/100
Our methodology examines 15 criteria including team transparency, audit quality, and governance.
Founder Jeff Yin is publicly named and linked to Bitmap Technology, backed by Sequoia Capital and IDG Capital, and a head of business development is identifiable on LinkedIn — reducing anonymity concerns at the leadership level. However, the broader engineering team's credentials are not independently verified in available sources, and treasury asset composition and validator/foundation centralisation details are undisclosed. Notably, several unrelated "Merlin"-branded projects exist, including one tied to a 2023 insider rug pull — these are confirmed distinct from Merlin Chain (MERL), but the naming overlap itself is a source of investor confusion worth flagging.
Merlin Chain has been audited by ScaleBit (January 2024) and by Beosin, listed via CertiK Skynet (published February 2025), which rated code security 61.6/100 ("Poor/Relatively Good") — an audit trail exists, but the CertiK score itself signals unresolved weaknesses rather than a clean bill of health. Staking and quick-start documentation is published, and the whitepaper describes slashing and incentive design. Given named audits exist but flag only moderate security quality, and treasury/centralisation details remain undisclosed, this is a partial-transparency profile rather than either a fully documented or an unaudited project.
Maysir — Does Merlin Chain involve gambling or speculation?
Merlin Chain is not designed as a gambling instrument; it functions as Bitcoin scaling infrastructure with real dApps, staking and governance utility. Some speculative behaviour is visible in secondary markets and in the project's own "meme-driven" marketing framing, but this does not define the protocol's core design. On balance, genuine utility outweighs the speculative branding.
Assessment: Minor Maysir (Incidental)
Score: 70/100
Our methodology examines 11 criteria to determine whether Merlin Chain is a gambling instrument or a genuine economic tool.
Merlin Chain provides tangible infrastructure utility: ZK-Rollup scaling for Bitcoin, EVM compatibility enabling Solidity developers to build DeFi, NFT and gaming applications, and a bridge/oracle/data-availability stack supporting 150-200+ dApps. MERL itself is used for gas fees, staking-based network security, and governance voting over upgrades and supported assets. This is productive, service-oriented use of a token — powering real computation and settlement — rather than a purely speculative instrument whose only function is price wagering, which is what distinguishes it from maysir-type structures.
Against this utility, TVL growth from $1.2B to over $3.5B alongside a reported drop in active addresses from 1.9M to roughly 1M suggests capital inflows may partly reflect yield-chasing rather than proportional organic usage growth. The project's own "Make Bitcoin Fun Again" and "meme-driven" branding further leans into speculative appeal. Third-party misuse of any liquid, tradeable token for short-term wagering is possible but is not determinative of the coin's own Shariah status; Merlin Chain's underlying design remains utility-first infrastructure, meaning secondary-market speculation should not be weighed as a design flaw.
The Full 27-Point Screening
1. Legitimacy (4 criteria)
| Criterion | Score | Analysis |
|---|
| Team Transparency | 55/100 | Founder Jeff Yin and Bitmap Technology are named with disclosed background and investors, plus a named BD lead, but the broader core engineering team is not detailed or independently verified [49][56][41]. |
| Fraud & Scam Risk | 65/100 | No fraud, hack or rug-pull tied to Merlin Chain (MERL) itself appears in the sources despite extensive coverage; a same-named but unrelated zkSync DEX rug pull is explicitly a different project [7][15][18][23][54]. |
| Use Case Legitimacy | 75/100 | Merlin Chain is documented as a functioning Bitcoin L2 with a large dApp ecosystem, real bridged volume, and sustained TVL, indicating genuine utility beyond hype [8][19][24][32]. |
| Ethical Practices | 70/100 | The base protocol is neutral blockchain infrastructure; interest-based lending appears only in third-party dApps built on top, which per the misuse principle does not determine the base protocol's own ruling [22][6][19]. |
Summary: Merlin Chain has a named founder and traceable parent company with no f
2. Project Operations (9 criteria)
| Criterion | Score | Analysis |
|---|
| Core Protocol Business | 80/100 | The core protocol is a Bitcoin Layer-2 scaling and DeFi infrastructure network, not itself a prohibited-sector business [3][19][55]. |
| Transaction Fees | 65/100 | Gas fees in MERL are stated to be partially burned to control inflation, indicating a non-riba fee-handling design, though full mechanics are not exhaustively detailed [21]. |
| Treasury Assets | 40/100 (low evidence) | Sources give a "Treasury" allocation percentage but no detail on whether treasury holdings include interest-bearing instruments, so composition cannot be confirmed [36]. |
| Revenue Model | 45/100 | Stated protocol revenue derives from staking, liquidity provision and deposits across BTCFi activities, some of which (via partner lending dApps) are interest-linked, though the base fee revenue itself is not described as interest-based [37][22]. |
| Transparency | 55/100 | Public documentation, a whitepaper, and developer guides exist, and an audited source code base is implied, but no explicit statement of full open-source licensing is found [3][5][10]. |
| Governance | 50/100 | MERL holders can vote on upgrades and parameters, but the degree of real decentralisation of validators/foundation control is not detailed in these sources [5][16][29]. |
| Launch Fairness | 45/100 | The launch involved a public sale of only 1% alongside sizeable private-investor (15.23%), advisor (3%) and team (4.2%) allocations with vesting, indicating a VC-influenced rather than fully fair launch [4][12]. |
| Token Distribution | 55/100 | Distribution spans Ecosystem, Seal, Community, private investors, team and advisors with disclosed percentages and multi-year vesting, giving moderate breadth but notable insider allocation [4][12][28]. |
| Speculation/Utility Ratio | 60/100 | The ecosystem shows genuine dApp and TVL activity, but the project's own marketing explicitly embraces "meme-driven" and "Make Bitcoin Fun Again" branding alongside headline high staking APRs [8][16][41][30]. |
Summary: See the criterion analysis above.
3. Financial Health (4 criteria)
| Criterion | Score | Analysis |
|---|
| Protocol Revenue | 45/100 | Protocol revenue is described as coming partly from staking, liquidity provision and deposit activity across BTCFi dApps, some of which involve interest-bearing lending at the ecosystem level [37][22]. |
| Financial Status | 55/100 | TVL grew substantially to over $3.5B and Merlin Chain is called the largest Bitcoin L2 by TVL, though active address counts reportedly declined, showing a mixed stability picture [24][32][40]. |
| Interest Assessment | 65/100 | The base Merlin Chain protocol itself does not natively offer lending/borrowing; interest-bearing lending (e.g., Avalon Finance, Mage Finance) is explicitly a third-party dApp layer, not the base chain [22][19][38]. |
| Audit Quality | 55/100 | Named audits by ScaleBit (Jan 2024) and Beosin (via CertiK Skynet, Feb 2025) exist, though CertiK Skynet rated Merlin Chain's code security only 61.6/100 ("Poor/Relatively Good") [10][26]. |
Summary: See the criterion analysis above.
4. Token Economics (5 criteria)
| Criterion | Score | Analysis |
|---|
| Token Purpose | 70/100 | MERL functions as a utility/governance token for gas, staking, governance and collateral rather than existing purely as a speculative meme asset [5][16][29]. |
| Governance Rights | 65/100 | MERL holders explicitly have voting rights over protocol upgrades, parameters and supported assets [5][16][29]. |
| Rewards Distribution | 40/100 | Reward figures are quoted as specific headline rates (12-18% APY, later 45% APR) drawn from emissions, resembling a promised/fixed-looking yield rather than a purely performance-tied variable return [21][30]. |
| Speculation Controls | 40/100 | Fee-burning and revenue-funded buybacks are documented anti-speculation levers, but they sit alongside explicit meme-driven marketing and very high advertised APRs that encourage speculative behaviour [21][37][30]. |
| Asset Backing | 50/100 | MERL is not described as backed by any reserve asset; its value is tied to network usage, governance and staking demand rather than tangible or halal collateral [16][29]. |
Summary: See the criterion analysis above.
5. Staking Mechanism (5 criteria)
| Criterion | Score | Analysis |
|---|
| Mechanism Type | 55/100 | Staking includes both direct/delegated PoS staking of MERL and a bridge-based "Merlin's Seal" program that locks L1 assets to mint M-Tokens, documented in user guides, though bridging introduces a custody-like lock rather than pure non-custodial flexibility [43][45][6]. |
| Islamic Contract Classification | 30/100 | Quoted headline staking rates (12-18% APY, later 45% APR) resemble a promised, fixed-looking return rather than a clean profit-sharing (Mudarabah/Wakalah) structure, leaving the contract classification an unresolved question [21][30]. |
| Rewards Structure | 35/100 | Rewards are emissions-based and advertised with specific fixed-looking headline rates rather than clearly demonstrated as variable outputs of real network profit [5][21][30]. |
| Documentation | 65/100 | Staking mechanics, unstaking steps, and the Merlin's Seal program are documented in official docs and the whitepaper, including slashing and incentive design [43][5][45]. |
| Shariah Alignment | 35/100 | The combination of bridge-based custody, emissions-funded rewards, and inconsistently reported high headline APRs leaves a core, unresolved question about whether the staking reward structure is genuinely profit-based rather than a guaranteed-return arrangement [21][30][6]. |
Summary: See the criterion analysis above.
Overall Assessment: Merlin Chain presents a mixed Shariah profile; review each dimension above and consult a qualified scholar for your situation.
Written by ThanvirFounder, Ex Director S&P Global Energy
Reviewed by Imam Omar SiddiqiShariah Scholar