Islamic Finance Principles Assessment
Riba — Does Zyfai involve interest?
Zyfai does not lend money at interest itself, but it exists specifically to funnel user capital into interest-bearing DeFi money markets such as AAVE, meaning its entire revenue base is downstream of riba-generating yield. The staking reward structure is variable and profit-linked rather than fixed, which is structurally closer to permissible profit-sharing, but this does not purify the underlying interest income. For Muslim investors, this is a material and unavoidable riba concern baked into the product's core function.
Assessment: Riba Dominant
Score: 34.4/100
Our methodology examines 10 criteria to evaluate how well Zyfai avoids interest-based mechanisms.
Zyfai's only disclosed revenue is a 10% performance fee taken on profit its yield agent generates by depositing user stablecoins into third-party lending/yield protocols, most notably AAVE, alongside Pendle, Silo, and Euler. AAVE and comparable money markets pay interest on deposited capital, so the base yield Zyfai skims from is riba by nature, even though Zyfai itself never originates loans. Collected fees flow into a DAO treasury largely held in USDC, meaning the treasury's inflows, though denominated in a stable asset, are sourced from interest-bearing positions rather than trade, equity, or service-based profit.
Staker rewards (via stZFI) are paid from 50% of collected performance fees, distributed monthly in USDC on a pro-rata, non-guaranteed basis, with reported APYs swinging from roughly 2.4% to near 30% month to month. This variability, performance dependence, and absence of a fixed guaranteed return distinguishes it structurally from classic riba-based deposit interest, since stakers bear real fluctuation and no principal-guaranteed coupon exists. However, because the fee pool itself originates from AAVE-style interest income, the variable distribution mechanism does not cleanse the underlying source; stakers are ultimately receiving a share of riba-derived profit, just via a non-fixed formula.
Gharar — How much uncertainty does Zyfai involve?
Uncertainty in Zyfai is moderate: a named, professionally traceable team and partially public code reduce ambiguity, while inconsistent tokenomics disclosures and the absence of a confirmed dedicated security audit increase it. On balance, informational gaps around audits and exact governance control are the main sources of gharar here.
Assessment: Excessive Gharar (High Uncertainty)
Score: 47.3/100
Our methodology examines 15 criteria including team transparency, audit quality, and governance.
The team is named and verifiable — Gauthier Vila, Paul Laulan, Utkir, Sunny, and Ayush Gupta — with LinkedIn histories showing EPFL ties, ETHGlobal hackathon wins, Ethereum Foundation grants, and a predecessor product ("Zyfi") operating with millions of transactions since 2020-2021. Some code is public via GitHub and an SDK. Offsetting this, distribution figures conflict between sources (DAO 33%/Team 22.5% versus Foundation 42%/Insiders 19.5%), and LinkedIn lists Zyfai as a "Nonprofit," an odd and unexplained classification for a fee-revenue business, adding avoidable disclosure inconsistency.
No named, dated Zyfai-specific audit with public findings could be confirmed. A Cyberscope "audit" page is referenced without findings, and a Halborn report cited elsewhere in fact covers an unrelated project (Substance Exchange V3), not Zyfai. This absence of a verifiable, dedicated smart-contract audit is a genuine gharar concern for a protocol handling user deposits and should be named plainly rather than glossed over. Staking-specific risk disclosures — exact lock-up terms, snapshot mechanics, smart contract risk — are also not detailed in available DAO proposals or blog reports, though fee-flow and reward-split mechanics are documented.
Maysir — Does Zyfai involve gambling or speculation?
Zyfai's core function is not gambling: it is a capital-routing yield product with a real fee model, disclosed treasury flows, and measurable usage. Some speculative behavior is possible in ZFI's secondary market trading, as with any listed token, but this is a feature of markets generally rather than of Zyfai's design. The product itself is built around yield generation and rebalancing, not chance-based payoff.
Assessment: Maysir / Qimar (Gambling)
Score: 46.1/100
Our methodology examines 11 criteria to determine whether Zyfai is a gambling instrument or a genuine economic tool.
ZFI carries a me
The Full 27-Point Screening
1. Legitimacy (4 criteria)
| Criterion | Score | Analysis |
|---|
| Team Transparency | 78/100 | Founders and core team are named with verifiable LinkedIn histories, prior projects, and credentials such as EPFL ties and Ethereum Foundation grants. |
| Fraud & Scam Risk | 65/100 | No fraud, hack, or SEC/DOJ action tied specifically to Zyfai was found, though the retrieved enforcement cases concern unrelated projects and the "nonprofit" LinkedIn label is unexplained. |
| Use Case Legitimacy | 78/100 | The protocol has a functioning product with reported TVL, user counts, and transaction volume performing real automated DeFi yield allocation, not pure hype. |
| Ethical Practices | 25/100 | The protocol's own stated design is to optimize and capture interest-type yield from lending markets, which the founder himself describes as "generating interest," making this a core-design rather than third-party-misuse concern. |
Summary: The team is named, credentialed, and traceable, with no fraud findings tied to Zyfai itself, though its "nonprofit" corporate label is unexplained.
2. Project Operations (9 criteria)
| Criterion | Score | Analysis |
|---|
| Core Protocol Business | 22/100 | The base protocol's core business is routing user capital into third-party interest-bearing lending pools such as AAVE to earn yield. |
| Transaction Fees | 62/100 | Fees are a disclosed 10% performance charge on realized profit only, not on principal, and flow transparently to a DAO treasury and stakers. |
| Treasury Assets | 0/100 (low evidence) | The sources describe fee flows into a DAO treasury but do not disclose what assets the treasury actually holds, so interest-bearing composition cannot be established either way. |
| Revenue Model | 30/100 | Revenue is a fee taken on yield that is itself generated through interest-based lending activity in underlying protocols. |
| Transparency | 72/100 | Extensive public documentation, DAO governance proposals, and a public SDK/GitHub repository are available. |
| Governance | 45/100 | A DAO nominally governs fee and reward decisions, but the operating company Ondefy Ltd retains control of treasury multisigs and reward committees, indicating meaningful centralisation. |
| Launch Fairness | 42/100 | Sizeable team (14-22.5%) and investor (16-17%) allocations with lock-ups indicate a conventional VC-backed launch rather than a fully fair/permissionless launch. |
| Token Distribution | 38/100 | Reported allocation breakdowns conflict materially across sources, making the actual distribution structure unclear despite apparent breadth. |
| Speculation/Utility Ratio | 58/100 | The token carries real fee-sharing/governance utility, but reported APY volatility and incentive programs suggest a meaningful speculative trading component alongside utility. |
Summary: Zyfai is a non-custodial yield-aggregation protocol that automatically deploys user funds into third-party interest-bearing DeFi lending markets, taking a disclosed performance fee under a DAO structure that shares real control with its operating company.
3. Financial Health (4 criteria)
| Criterion | Score | Analysis |
|---|
| Protocol Revenue | 25/100 | All disclosed protocol revenue derives from fees on interest-type yield sourced from third-party lending protocols. |
| Financial Status | 50/100 | Multiple monthly reports show growing but still modest TVL/AUM (roughly $2.5M to $10M) with some revenue and fee volatility disclosed. |
| Interest Assessment | 20/100 | The protocol's core mechanism is scanning and depositing into interest-bearing lending markets, placing interest exposure at the heart of its function. |
| Audit Quality | 20/100 | A Cyberscope audit listing exists but with no disclosed findings or date, and the only detailed Halborn audit found in the sources belongs to an unrelated project, so no verifiable Zyfai-specific audit could be confirmed. |
Summary: Protocol revenue comes entirely from fees on interest-type yield generated through external lending protocols, and no dated, Zyfai-specific audit report with public findings could be confirmed in these sources.
4. Token Economics (5 criteria)
| Criterion | Score | Analysis |
|---|
| Token Purpose | 62/100 | ZFI has functional utility through staking-based fee-sharing and governance rather than being purely speculative branding. |
| Governance Rights | 52/100 | A DAO structure with governance proposals and voting on fee mechanisms exists, though operational control is shared with the founding company. |
| Rewards Distribution | 65/100 | Staking rewards are explicitly variable, tied to monthly fee collection and TVL rather than a fixed guaranteed rate. |
| Speculation Controls | 32/100 | Team/investor vesting schedules exist, but no anti-speculation controls for general token trading or staking exposure are described. |
| Asset Backing | 30/100 | The token's value claim rests on a share of protocol fee revenue that is itself largely derived from interest-bearing lending yield, rather than halal-asset or pure-utility backing. |
Summary: ZFI provides real staking and governance utility with variable, fee-derived rewards, but those rewards and the token's backing trace back to interest-based lending activity, and reported allocation data is inconsistent across sources.
5. Staking Mechanism (5 criteria)
| Criterion | Score | Analysis |
|---|
| Mechanism Type | 58/100 | Staking is described as non-custodial via a dashboard with documented snapshot-based reward timing, though full lock-up/withdrawal terms are not fully detailed. |
| Islamic Contract Classification | 22/100 | Staking rewards are funded by performance fees on interest-based lending yield, making the underlying contract structure difficult to classify as a clean Mudarabah/Wakalah arrangement. |
| Rewards Structure | 68/100 | Reported monthly APYs vary significantly (roughly 2.4% to near 30%) based on real fee collection rather than being fixed or guaranteed. |
| Documentation | 55/100 | Fee flow, snapshot timing, and distribution ratios are documented across DAO proposals and monthly reports, though staking-specific risk disclosures are limited. |
| Shariah Alignment | 22/100 | Because staking rewards trace back to interest-based lending yield, a decisive Shariah question about the underlying reward source remains unresolved. |
Summary: Zyfai offers native, non-custodial staking with variable, fee-funded rewards, but because those fees originate from interest-bearing lending yield, the core Shariah classification of the staking reward remains an open question.
Overall Assessment: Zyfai is a transparent, actively operated DeFi automation project, but its core function of optimizing and profiting from interest-based lending yield is a significant unresolved Shariah concern that carries through its fee revenue, tokenomics, and staking rewards.
Written by ThanvirFounder, Ex Director S&P Global Energy
Reviewed by Imam Omar SiddiqiShariah Scholar