Is Uniswap Halal: Is UNI Cryto Coin Halal?

In this article we do a complete Shariah screening of Uniswap to determine if UNI is a halal or haram cryptocurrency. The short answer is yes, Muslims may trade and invest in UNI, but have a read and see if you are comfortable with our assessment first.

What is Uniswap?

Uniswap is a cryptocurrency exchange built on the Ethereum blockchain that relies on an automated market maker system rather than a conventional order book. It allows users to pool together two or more assets, which are then traded against each another at a constant price, rather than antagonist individual buy and sell orders.

Uniswap is unique because it solves the problem of high spreads for thinly traded illiquid assets on demand. This problem stems from the lack of incentives for market makers to provide additional liquidity for little-known assets.

Anyone can supply funding to a pool and receive remuneration depending on the volume of trading that occurs. However, with Uniswap, contributions with little liquidity are susceptible to slippage as the cost paid goes up as the volume demanded increases.

Further details on Uniswap website

Who Invests In Uniswap?

ParaFi Capital

Paradigm

Union Square Ventures

Uniswap Technology

Compared to other DEXs, there is no native crypto coin, and all interactions occur on-chain. Typically, exchanges are run by means of a book where people are ready to purchase and sell a tad. The difference between these prices is how they compensate the intermediary. Uniswap does not count on an order book and instead uses a price determine what traders sell. The algorithm uses the share of two units to determine the price.

Uniswap’s price maker uses what’s known as constant product market maker to always provide liquidity regardless of the price or order size. This is achieved by asymptotically escalating the buy-price per order asymptotically when orders are static or increase, resulting in major slippage on large orders.

A trade pool includes an ETH token and a token of the corresponding ERC-20 standard, with the total amount of ETH and ERC-20 tokens involved in the trade balance the same. One trade happens when any two pool participants exchange ETH tokens and ERC-20 tokens is created with the ratio between these sums. Users can also exchange ETH tokens and ERC-20 tokens, but Uniswap will perform two transactions for a single swap.

Liquidity providers who add money to a pool receive a share based on how much liquidity is actually pooled. The tokens they generate do not count as speculative investments — in fact, they just track how much of the pool’s funds have been set aside.

Legitimacy Screening of Uniswap

Vitalik Buterin, Ethereum’s founder proposal from 2016 concerning an ethereum-based decentralized exchange (DEX) that used an automated market maker (AMC) system was used by Hayden Adams to eventually develop this into a functional product, for which he began work in 2017. He even received a $100,000 grant from Ethereum Foundation to get this progect going.

This gives us the confidence to confirm that Uniswap has an underlying fundamental value, that can be considered as “Mal” under Islamic rulings. Therefore, as a project it has legitimacy in terms of Shariah.

Is Uniswap project aligned with Islamic values?

Yes, Uniswap crypto project does align with Islamic values. The main aim of this project is to provide liquidity to the market by using a swap mechanism as described earlier and ool funds together. There is nothing anti Islamic about such a technology. 

Financial Screening of Uniswap:

Financial screening ensures that the crypto asset meets the financial criteria for Shariah compliance, if it is an equity based token. Uniswap is not backed by any equity, so there is no financial screening required on this coin/ token. Here we would typically look at things like debt to income ratio to ensure borrowing is limited to a tolerable level.

UNI Token Screening for Shariah Compliance

Token Type: ERC-20

Token Uses: Vote

UNI holders are responsible for the protocol governance with the primary focus being to drive Uniswap v2 forward. UNI holders can also specify token pools that can collect fees. This token has a utility that is permissable under Shariah so Uniswap’s UNI token is considered halal.

Is Staking Uniswap Halal?       

There is no mining or staking in this system so we can move on to the academic and scholarly opinions

What Does The Muslim Crypto Community Think of Uniswap?           

Marhaba DiFi‘s Shariah governance board also beleives Uniswap: UNI is halal.  

Sharlife considers Uniswap as a halal cryptocurrency based on the five areas assessed for Shariah complaince screening. 

Crypto Halal Office for Monitoring and Sharia auditing on cryptocurrency markets thinks Uniswap: UNI coin is a Halal digital asset based on its Shariah complaince screening.

Islamic Finance Guru (IFG) believes Uniswap: UNI is a halal cryptocurrency based on its method of Shariah complaince screening.

If you know of other academic or scholarly views on this, please add in comments and we will update accordingly. Alternatively, you may want to join our community of Muslims crypto investors and traders, to share, learn and profit from halal digital assets.          

Is Uniswap Halal: Is UNI Crypto Coin Halal?

Yes, Uniswap: UNI crypto coin is Halal as its ecosystem allows investors, developers, and liquidity providers to participate in a financial marketplace that is fair and functional to all. This is not against Shariah guidelines so Muslims may invest, trade and stake UNI crypto coin.

We hope you found this useful. Please view our Halal Crypto List to find suitable digital asset investments, without compromising your Islamic faith.