Islamic Finance Principles Assessment
Riba — Does XL1 involve interest?
XL1 does not exhibit classic riba structures: there is no lending desk, no fixed-interest deposit product, and no promised guaranteed yield on holding the token itself. Rewards flow from network participation (data verification, validation) and fee burns rather than interest on capital. For Muslim investors, XL1's revenue and reward design is largely free of direct riba mechanics, though the dual-token staking arrangement warrants closer reading before treating it as an income-generating instrument.
Assessment: Minor Riba
Score: 85/100
Our methodology examines 10 criteria to evaluate how well XL1 avoids interest-based mechanisms.
XL1's only disclosed revenue source is transaction/gas fees paid in XL1, a portion of which is permanently burned to offset inflation rather than distributed as interest-bearing profit to a central treasury or token holders. The XYO Treasury holds roughly 22% of genesis supply, but no interest-bearing treasury assets (bonds, money-market instruments, lending positions) are disclosed in available documentation. This fee-burn model resembles a deflationary utility mechanism rather than a riba-based income stream, since burned value is destroyed rather than paid out as guaranteed return to any party.
Rewards in this ecosystem are earned by staking the separate XYO token to run validator or node infrastructure, with XL1 paid out as compensation for verifiable network work — data verification, block production, and honest participation. This is a variable, performance-linked payout tied to service rendered, not a fixed-rate deposit return, which aligns with permissible profit-and-labor-based compensation rather than riba. A slashing mechanism penalizes dishonest actors by burning staked XYO, reinforcing that rewards are contingent on genuine performance rather than guaranteed regardless of effort or outcome.
Gharar — How much uncertainty does XL1 involve?
XL1 carries a moderate degree of uncertainty, concentrated less in its basic function than in disclosure gaps around audits, lock-up terms, and slashing specifics. Named leadership and multi-year public documentation reduce ambiguity about the project's purpose, while missing audit confirmation and thin liquidity increase it. On balance, the uncertainty here is more about verification than about the coin's fundamental design.
Assessment: Moderate Gharar (Material Uncertainty)
Score: 50.3/100
Our methodology examines 15 criteria including team transparency, audit quality, and governance.
XYO Layer One is led by publicly named co-founders Arie Trouw and Markus Levin, who have discussed the project in interviews and maintain public LinkedIn profiles, reducing anonymity-related concern. Documentation is available via docs.xyo.network, covering the dual-token architecture, fee-burn mechanics, and DePIN use cases. However, explicit open-source licensing status is not confirmed in available sources, and independent third-party verification of team credentials beyond self-reported bios is limited, leaving a residual transparency gap around governance and code accessibility.
No named, dated security audit — from firms such as Halborn, Trail of Bits, Neodyme, or Certora — covering XYO Layer One or XL1 smart contracts appears in available records; other audits found in research belong to unrelated projects. This is a genuine and material gharar concern: an unaudited Layer-1 handling gas, validator rewards, and cross-chain bridging (WXL1) carries unverified code-risk. Additionally, exact slashing percentages, lock-up durations, and unlock conditions for staked XYO are not spelled out publicly, compounding uncertainty around the staking mechanism's operational terms.
Maysir — Does XL1 involve gambling or speculation?
XL1 does not resemble a gambling instrument or a meme-driven speculative vehicle by design; it is built as a functional gas and reward token for a data-verification network. Speculative trading can occur on any listed asset, but XL1's core protocol is oriented toward productive utility rather than chance-based payout. The main caution is thin market liquidity rather than an inherent gambling structure.
Assessment: Minor Maysir (Incidental)
Score: 70/100
Our methodology examines 11 criteria to determine whether XL1 is a gambling instrument or a genuine economic tool.
XL1 powers a Layer-1 blockchain purpose-built for DePIN infrastructure, AI-training data verification, geolocation verification, and real-world-asset tokenization, drawing on a reported network of 8-10 million-plus nodes. The token is consumed for gas, smart-contract execution, and validator/node compensation — genuine operational use cases tied to real economic activity rather than a payout mechanism dependent on chance. This productive utility distinguishes XL1's design from maysir-style instruments where value transfer is driven purely by speculative chance rather than service rendered.
Against this utility-driven design, secondary-market conditions show signs of speculative fragility: one source reports XL1/USDT volume of only about $16,300, representing 87% of total tracked trading volume, indicating very thin and concentrated liquidity. Such thin markets can amplify price volatility and speculative swings disconnected from underlying network usage. This is a market-behavior caution rather than evidence that XL1 itself is designed for gambling; third-party speculative trading does not, by itself, alter the permissibility of the underlying utility token.
The Full 27-Point Screening
1. Legitimacy (4 criteria)
| Criterion | Score | Analysis |
|---|
| Team Transparency | 75/100 | Co-founders Arie Trouw and Markus Levin are named and appear in public interviews and LinkedIn profiles, making the team traceable, though independent verification of credentials is limited. |
| Fraud & Scam Risk | 60/100 | No fraud, hack, or rug-pull indicators are reported against XYO/XL1 in these sources, but the sources also do not affirmatively confirm the absence of such risk beyond silence. |
| Use Case Legitimacy | 80/100 | The project targets a clear real-world use case in DePIN data verification, AI training data, and RWA tokenization rather than pure hype. |
| Ethical Practices | 85/100 | The protocol's own design is data verification/infrastructure focused, with no inherent haram-industry purpose described. |
Summary: The project has named, publicly visible co-founders and a multi-year operating history, with no fraud or regulatory action found against it in these sources.
2. Project Operations (9 criteria)
| Criterion | Score | Analysis |
|---|
| Core Protocol Business | 85/100 | The base protocol is a data-verification/DePIN blockchain, not a prohibited-sector business. |
| Transaction Fees | 78/100 | Fees are paid in XL1 with a portion of base fees permanently burned rather than extracted as riba-like income. |
| Treasury Assets | 70/100 | The disclosed treasury consists of native XL1 token allocation (~22% of supply); no interest-bearing holdings are mentioned, though full treasury composition is not detailed. |
| Revenue Model | 78/100 | Revenue derives from network usage fees rather than any interest-based mechanism. |
| Transparency | 60/100 | Public documentation exists describing tokenomics and architecture, but explicit open-source licensing status is not confirmed in these sources. |
| Governance | 45/100 | Governance authority rests with the separate XYO token and a treasury/team holding roughly 44% combined, indicating meaningful centralisation of control away from XL1 holders. |
| Launch Fairness | 45/100 | Genesis distribution allocates ~22% to team/advisors and ~22% to treasury, leaving unclear separation of true public/community allocation within the "56% community & investors" bucket. |
| Token Distribution | 50/100 | Token distribution figures show a sizeable combined insider (team+treasury) share of roughly 44%, a moderate concentration relative to the broader community allocation. |
| Speculation/Utility Ratio | 60/100 | The token is described with concrete utility (gas, rewards, contracts) and burn mechanics that manage supply, though real-world trading behaviour/speculation intensity is not detailed in these sources. |
Summary: XL1 functions as a utility token for gas, fees, and rewards on a DePIN-focused Layer-1 blockchain, with burn mechanics offsetting inflation and governance reserved to a separate token.
3. Financial Health (4 criteria)
| Criterion | Score | Analysis |
|---|
| Protocol Revenue | 78/100 | Revenue is fee-based rather than derived from interest-bearing lending activity. |
| Financial Status | 30/100 | Reported trading volume for XL1 is extremely thin (around $16,300 on its main pair), indicating an early-stage, illiquid market. |
| Interest Assessment | 85/100 | The base protocol offers no lending or borrowing function; XL1 is limited to gas, contract execution, and rewards. |
| Audit Quality | 15/100 (low evidence) | No named, dated third-party security audit of XYO Layer One or XL1 smart contracts appears in these sources; other audits retrieved belong to unrelated projects, so audit status cannot be established. |
Summary: The base protocol charges only usage fees and offers no lending or borrowing function, but market liquidity appears very thin and no independent security audit could be found in these sources.
4. Token Economics (5 criteria)
| Criterion | Score | Analysis |
|---|
| Token Purpose | 80/100 | XL1 is explicitly designed and marketed as a utility token for gas, contract execution, and rewards rather than as a speculative meme asset. |
| Governance Rights | 20/100 | XL1 holders have no governance rights, as governance is reserved exclusively for the separate XYO token, a deliberate structural exclusion rather than a neutral absence. |
| Rewards Distribution | 72/100 | XL1 rewards are variable, tied to validator/node activity and network usage rather than a fixed guaranteed rate. |
| Speculation Controls | 45/100 | Burn mechanisms offset inflation and provide some supply discipline, but no explicit anti-speculation controls (caps, restrictions) beyond vague team vesting language are described. |
| Asset Backing | 50/100 | XL1's value is tied to network utility/demand for gas rather than any hard-asset backing, which the sources describe only in general terms. |
Summary: XL1 is a genuine utility token with variable, activity-based rewards but no governance rights and only partial anti-speculation design.
5. Staking Mechanism (5 criteria)
| Criterion | Score | Analysis |
|---|
| Mechanism Type | 55/100 | Staking is described as validator/node-based via the XYO token, implying a non-custodial, self-run model, but lock-up and custody specifics are not detailed. |
| Islamic Contract Classification | 45/100 | Rewards for staking XYO to earn XL1 resemble a service/participation-based structure, but the sources do not classify it against a specific Islamic contract, leaving the categorisation unresolved. |
| Rewards Structure | 65/100 | Rewards are sourced from transaction fees and block-production incentives, suggesting a variable, activity-linked structure rather than fixed interest. |
| Documentation | 45/100 | Public docs describe the dual-token and slashing model generally, but detailed lock-up periods and full risk disclosures are not present in these sources. |
| Shariah Alignment | 48/100 | The staking design avoids explicit interest but leaves unresolved gaps in disclosed lock-up terms, slashing detail, and contract classification, creating moderate unresolved uncertainty. |
Summary: A staking mechanism exists indirectly through the paired XYO token, earning XL1 rewards, but lock-up terms, custody details, and full risk documentation are not established in these sources.
Overall Assessment: XL1 presents as a utility-driven infrastructure token with a traceable team and plausible real-world use case, tempered by unresolved gaps in audit verification, governance access, and detailed staking disclosure.
Written by ThanvirFounder, Ex Director S&P Global Energy
Reviewed by Imam Omar SiddiqiShariah Scholar