Islamic Finance Principles Assessment
Riba — Does XYO Network involve interest?
XYO Network does not run a lending or interest-bearing business model; its revenue derives from the COIN geomining app and network/data services. Staking rewards are variable and tied to network activity rather than fixed interest payments. On riba grounds specifically, XYO's core design appears reasonably clean, though treasury asset composition is undisclosed.
Assessment: Moderate Riba
Score: 66.1/100
Our methodology examines 10 criteria to evaluate how well XYO Network avoids interest-based mechanisms.
XYO's revenue model centers on a consumer geomining app (COIN) and enterprise data/RWA services, not lending, borrowing, or interest-bearing financial products. The base protocol does not offer credit facilities or yield-bearing deposits resembling conventional interest. Genesis allocation splits tokens roughly 56% Community & Investors, 22% Team & Advisors, and 22% Treasury, but the composition of treasury holdings (whether cash, crypto, or interest-bearing instruments) is not disclosed in available sources. A Reddit-cited SEC filing alleges recurring ~$2M annual losses, raising sustainability questions, though this is unverified secondhand commentary rather than audited fact.
Staking on XYO Layer One involves locking XYO tokens as a Validator Node or Block Producer Node operator, earning XL1 rewards through Block Rewards and a growing Step Reward Pool. These rewards decrease per-block over time and depend on network activity and staking participation levels, not a predetermined fixed rate — structurally resembling a performance-based return rather than riba-bearing interest. Slashing risk for dishonest node behavior (with slashed tokens burned) further ties rewards to genuine service provision rather than guaranteed capital appreciation. The effective dollar value of rewards also fluctuates with XL1 emission and exchange rates, introducing market-based variability rather than fixed-return characteristics.
Gharar — How much uncertainty does XYO Network involve?
XYO carries a moderate-to-elevated level of uncertainty, stemming primarily from documentation and audit gaps rather than the founding team's identity. Named leadership and a long operating history reduce some ambiguity, but missing third-party audits and unclear governance mechanics increase it. On balance, the uncertainty here is significant enough to warrant caution.
Assessment: Moderate Gharar (Material Uncertainty)
Score: 56.1/100
Our methodology examines 15 criteria including team transparency, audit quality, and governance.
XYO's founders — Arie Trouw, Markus Levin, and Scott Scheper — are named, credentialed, and traceable across LinkedIn, Tracxn, and CryptoSlate, with a company history dating to 2012 and continuity through 2024-2026. This is a substantive reduction in gharar compared to anonymous projects. Documentation and some code are open via GitHub (papers-xyonetwork), though partly outdated and describing the legacy "XYO 1.0" system rather than the current XL1 chain. Governance mechanics — how proposals and voting actually function — are only lightly described in available sources, leaving real ambiguity about decision-making authority over the network.
No reputable, dated, XYO-specific audit report could be confirmed from available sources. CertiK's Skynet listing explicitly states XYO is "Not Audited By CertiK" with "3rd Party Audit: No." A Halborn audit exists in the research but covers an unrelated third-party protocol (Substance Exchange), not XYO or XL1. A referenced Cyberscope audit page for XYO provides no findings or dates. This absence of a verifiable, project-specific audit is a genuine gharar concern that should be named plainly rather than glossed over, particularly given the protocol's newly migrated XL1 architecture and undisclosed treasury composition.
Maysir — Does XYO Network involve gambling or speculation?
XYO is not designed as a gambling or speculative instrument; it functions as a DePIN network for location and data verification with real enterprise and consumer applications. Speculative trading can occur on secondary markets for any listed token, but that is a third-party behavior distinct from the protocol's own design. The underlying utility case is genuine, which weighs against a maysir classification.
Assessment: Moderate Maysir (High Risk)
Score: 59.8/100
Our methodology examines 11 criteria to determine whether XYO Network is a gambling instrument or a genuine economic tool.
XYO provides proof-of-location, proof-of-origin, and data-verification services used in supply chain, AI training data validation, and real-world-asset tokenization contexts, backed by a consumer app (COIN) with over 10 million node installs and a Revolut listing. This is productive economic activity — verifying and monetizing real-world data — rather than a zero-sum wager on price movement. The 2021 "Dracarys" burn event, which imposed a 180-day minimum staking lock on purchasers specifically to discourage short-term speculation, further indicates the project's own design intent leans toward long-term utility rather than gambling-style trading.
Against this genuine utility, XYO's token has long traded on public exchanges where speculative buying and selling clearly occurs, and the SEC's 2022 complaint named XYO among tokens alleged to be unregistered securities (settled without a litigated finding, with the company itself uncharged). Such secondary-market speculation is common to nearly all listed tokens and does not, by the stated judgment principle, retroactively make the protocol's own design gambling-oriented. The dual-token staking model's variable, activity-linked rewards also reduce the "pure bet" character often associated with maysir-flagged instruments.
The Full 27-Point Screening
1. Legitimacy (4 criteria)
| Criterion | Score | Analysis |
|---|
| Team Transparency | 85/100 | Founders Arie Trouw, Markus Levin and Scott Scheper are named, credentialed, and traceable via LinkedIn, Tracxn and CryptoSlate with a documented history since 2012. |
| Fraud & Scam Risk | 50/100 | Sources show a settled-without-litigated-finding SEC securities complaint naming XYO plus unverified Reddit allegations of financial strain, creating real but unresolved risk signals rather than proven fraud. |
| Use Case Legitimacy | 78/100 | XYO operates a genuine DePIN with millions of nodes, a consumer app with a major fintech listing, and stated enterprise/RWA/AI use cases. |
| Ethical Practices | 85/100 | The protocol's own design is data/location verification infrastructure with no inherent connection to a prohibited industry. |
Summary: XYO has a long-standing, named founding team and a real DePIN track record, tempered by an unresolved 2022 SEC securities complaint and unverified claims of financial strain.
2. Project Operations (9 criteria)
| Criterion | Score | Analysis |
|---|
| Core Protocol Business | 85/100 | The core protocol's business is decentralized data verification and physical infrastructure networking, not a prohibited sector. |
| Transaction Fees | 78/100 | Base transaction fees are burned and priority/gas fees are paid to producers for service, not structured as interest extraction. |
| Treasury Assets | 50/100 (low evidence) | Sources disclose the treasury's token allocation percentage but not what assets (cash, interest-bearing instruments, crypto) it actually holds. |
| Revenue Model | 60/100 | Revenue appears tied to an app-based ecosystem and network activity rather than lending, but no formal revenue model document was found. |
| Transparency | 68/100 | Documentation and some GitHub repositories are public, though sources note parts of the technical papers are outdated for the current version. |
| Governance | 40/100 | Governance is nominally token-based but on-chain data shows a high major-holder concentration ratio, indicating centralization risk. |
| Launch Fairness | 45/100 | The 2018 ICO and a later reserve-burn event involved retroactive pricing changes favoring early insider purchasers, raising fairness questions. |
| Token Distribution | 50/100 | Genesis allocation gives ~44% combined to team/advisors and treasury versus ~56% to community/investors, alongside high on-chain holder concentration. |
| Speculation/Utility Ratio | 55/100 | The network has real DePIN utility, but critical commentary suggests heavy reliance on app-based token mining rather than proven external data-sale revenue. |
Summary: The protocol runs a genuine location/data-verification network with a burn-based fee structure, but token distribution shows notable insider/treasury allocation and holder concentration.
3. Financial Health (4 criteria)
| Criterion | Score | Analysis |
|---|
| Protocol Revenue | 78/100 | No lending/interest-based revenue stream is described; income sources relate to app usage and network services. |
| Financial Status | 40/100 | A cited SEC filing reportedly shows recurring multi-million-dollar annual losses and high executive compensation, indicating financial fragility. |
| Interest Assessment | 80/100 | Native staking rewards derive from block/step production, not from a lending or interest-bearing mechanism at the base protocol level. |
| Audit Quality | 18/100 | CertiK explicitly lists XYO as not audited by CertiK with no third-party audit on record, and the only Halborn audit found relates to an unrelated third-party contract. |
Summary: No lending or interest exists at the base protocol level, but no dedicated XYO/XL1 security audit could be confirmed and reported financials suggest ongoing losses.
4. Token Economics (5 criteria)
| Criterion | Score | Analysis |
|---|
| Token Purpose | 75/100 | XYO is described across sources as a utility token for staking, governance and network security, not as a meme asset. |
| Governance Rights | 50/100 | Sources assert XYO carries governance rights but do not describe the actual voting or proposal mechanism. |
| Rewards Distribution | 75/100 | Rewards (Block and Step Rewards) are variable, tied to block production and participation, and decline over time rather than being fixed. |
| Speculation Controls | 65/100 | A historical burn-and-lockup program (Dracarys) was explicitly designed to discourage short-term speculative purchasing. |
| Asset Backing | 55/100 | The token's value proposition rests on network utility and deflationary design rather than any disclosed reserve of tangible or halal assets. |
Summary: XYO functions as a utility/governance/staking token with variable, activity-based rewards and a historical anti-speculation burn-and-lock program, though voting mechanics remain thinly documented.
5. Staking Mechanism (5 criteria)
| Criterion | Score | Analysis |
|---|
| Mechanism Type | 65/100 | Staking is performed via self-operated Validator/Block Producer nodes (non-custodial), with documented slashing risk, though current lock-up terms for the live network are not fully specified. |
| Islamic Contract Classification | 40/100 | The stake-one-token-earn-another structure with slashing and pooled rewards is not clearly classifiable into a clean Mudarabah/Wakalah framework from these sources. |
| Rewards Structure | 60/100 | Rewards are activity-based (block/step production) rather than fixed, but marketing language about beating "DeFi yields" adds ambiguity about how returns are framed. |
| Documentation | 65/100 | Architecture, node-structure and rewards pages document staking mechanics, though full current lock-up and slashing parameters are incomplete. |
| Shariah Alignment | 45/100 | Cross-token reward exposure, exchange-rate dependency, and slashing risk leave a degree of unresolved gharar in the staking design. |
Summary: XYO offers real non-custodial node staking with slashing and cross-token rewards, but the Islamic contract classification and full current terms carry unresolved uncertainty.
Overall Assessment: XYO appears to be a legitimate utility-driven DePIN project with reasonable transparency, though gaps in audit verification, treasury disclosure, and staking contract clarity leave open questions rather than settled answers.
Written by ThanvirFounder, Ex Director S&P Global Energy
Reviewed by Imam Omar SiddiqiShariah Scholar