Is Bitcoin Sharia Compliant?

January 30th, 2013   Submitted by Davi Barker

ShariaBitcoin

This is intended for a Muslim audience but I will endeavor to make it accessible to a general audience. It is really an appeal to Muslims for a little monetary sanity.

I am  in the uncomfortable position of being the only person I know even remotely qualified to answer this question. There’s no pride in that claim, but despair for the lack of interest in this subject in the Muslim community.

The Muslim scholars I’ve asked don’t really understand what Bitcoin is, and the average Bitcoin enthusiast doesn’t know anything about what has become a relatively esoteric area of Islamic law. So, I may be the only bridge between these two communities.

There are certain areas of Islamic law that only apply to money, specifically the rules for lending and the rules for charity, which is why we see the emergence of so-called “Sharia compliant” banking and “Zakat eligible” charity in the West. In fact, many have speculated that quashing Islamic banking is the real reason that central planners target Muslim countries, and targeting Islamic charities has absolutely been part of their domestic policy.

Zakat is an annual charity given by Muslims, calculated as 2.5% of their surplus wealth, including certain commodities, like precious metals. The money should go to the poor, the hungry, the orphan, or the traveler as directly as possible.

Now, I have serious doubts about the validity of paper money. I don’t see how a paper note printed by the Federal Reserve is any different from a paper note printed by Parker Brothers, and we don’t give Zakat on Monopoly money. It is only out of an abundance of caution that I give Zakat on paper money. I give Zakat on my precious metals with precious metals, and give a separate donation on my paper money with paper money. I will not give Zakat on precious metals with paper money, which means I had to find a Zakat eligible charity that would accept precious metals. I give to the Hidaya Foundation because I admire the integrity of their work, and I trust them to use my contribution with the correct intention. But no Zakat eligible charity that I know of accepts Bitcoin.

We’ve got to start by asking, “What is money in Islam?” To answer this I rely on the works of Imran Hosein, specifically his book “The Gold Dinar and Silver Dirham.” He is one of the most reliable Islamic scholars I know of on the subject.

Imran Hosein identifies six commodities that were used as money in Muhammad’s community. Gold and silver are explicitly mentioned in the Quran, but when they were in short supply the Muslims would use dates, wheat, barley and salt. Further, we have records of Muhammad applying the rules associated with money to these commodities, but not to other goods, like livestock, which were not used as money.

In later generations Muslims accepted some foreign coins, while rejecting others, and used other commodities in regions where the original six were uncommon. Rice in Indonesia, and sugar in Cuba for example.

So, why accept some coins and reject others? Why use some commodities, and not others? Imran Hosein identifies six traits common to all of these that amount to a definition of money in Islam.

  1. Money is either precious metals or food.
  2. Money is abundant and freely available.
  3. Money is durable and does not spoil or corrode.
  4. Money has intrinsic value.
  5. Money exists in creation and is made valuable by God.
  6. Money functions as a medium exchange.

I actually want to dispute the first trait. Imran Hosein is inferring the requirement of being metal or food from the original list, but that’s not explicit in the text. It may be that those commodities were used because they best fulfilled the other five traits. In explaining the first requirement he writes:

“Some scholars of Islam argue that mankind is free to use anything, even a grain of sand, as money. They then go on to declare that there is no prohibition to printing paper for use as money and then assigning any value to the paper. Our response is that only Allah Most High is al-Razzaq, the Creator of wealth. Whoever attempts to assume the divine prerogative by creating wealth out of paper, or arbitrarily assigning to grains of sand a value quite different from their natural value, would be guilty of Shirk (Idolatry).”

His objection to sand and paper is not that they are not metal or food, but that they have no intrinsic value. When describing intrinsic value, natural value, and God given value, which he uses interchangeably, his test is that the value is determined by supply and demand, and not artificially assigned by central planners. It seems to me, if a commodity is not metal nor food, but fulfills the other five traits it would make perfectly good money. For example, the Rai stones of Micronesia, the Wampum beads used by some Native Americans, or beaver pelts used as currency in pre-Revolutionary America.

Now we’ve got to ask, “What is Bitcoin?”

Bitcoin is a digital currency that is circulated within a world-wide peer-to-peer network. The network contains a public ledger of all transactions called the Blockchain, and private balances associated with user created accounts. While processing transactions Bitcoin minors attempt to solve a difficult math problem. When the solution is discovered a new block is created in the Blockchain and the minor is rewarded with new Bitcoins, which they distribute into circulation by transacting with other users. The production of Bitcoins decreases over time at a fixed rate, and can never exceed 21 million by design, but more importantly it can’t be manipulated by central planners.

Each public transaction has a corresponding private key so only the recipient can make the next transaction. Transactions are broadcast to the network, recorded in the ledger, and a new key is created giving the recipient effective ownership of the Bitcoin even though the information technically exists on every computer in the network.

The result is that Bitcoins can be exchanged freely by anyone in the network, even through national sanctions. This can be done without any central bank or government. It can be done from anywhere in the world that has access to the network. And it can potentially be done anonymously.

So how does this measure up to our definition of money?

First, is it a precious metal or a food? Well no, but as I’ve argued, I’m not sure this is a good criterion.

Second, is it of abundant supply and freely available? Absolutely. Anyone can become a Bitcoin miner simply by devoting the necessary computer processes, or they can acquire Bitcoin by exchanging some other currency for it, or accepting it as payment.

Third, is it durable? Absolutely. If you save your Bitcoins on a flash drive and hide it under your mattress for 20 years the data will still be intact. It is possible that the data could be corrupted, so it’s not as durable as gold or silver, but it is at least as durable as wheat or barley.

Fourth, does it have intrinsic value? People ask me what Bitcoin is backed by. The answer is it’s only valuable because people value it. What is gold backed by? The answer is the same. It’s only valuable because people value it. There is no central planner proclaiming that Bitcoin is valuable. It’s backed by itself, and that’s what intrinsic value means. Some people value it for the potential anonymity, others because it can be transferred over the internet without fees, others for the peace of mind that their account can’t be frozen by central planners. Whatever reason people value Bitcoin, it is for characteristics inherent to its design, not outside it.

Fifth, does it exist in creation, and is it made valuable by God? This is difficult to answer because it’s not typically part of an economic analysis. The test for this, according to Imran Hosein, is that the price is determined by supply and demand, and not arbitrarily by a central planner. So, for example, early Muslims accepted foreign copper coins, even though copper wasn’t one of the original six commodities used by Muhammad’s community, but they ignored the face value of the coin and traded it at the market price of copper. Bitcoin has no face value. No central planner arbitrarily assigns a value to it different from their natural value. Exchange sites like MtGox trade Bitcoin like Kitco trades gold at a market driven price.

I think of it like this. Gold exists in creation, but it has no utility until it is mined and made into a useful form. It requires human work and design to unlock its value. Similarly, solutions to math problems exist in creation, maybe not materially, but they are discovered not invented. But they aren’t valuable until they are given utility through the work of Bitcoin minors and the design of the Bitcoin network. The economic laws that govern price fluctuations reflect a God given value, even if the form of the Bitcoin program, like a coin, is of human design. For me, Bitcoin satisfies this requirement, but I could see how others might dispute that conclusion.

Sixth, does it function as a medium of exchange? Absolutely. Bitcoin is used by thousands of people every day to buy, sell and trade and is divisible down to eight decimal places.

So, of our six requirements of money in Islam, Bitcoin easily satisfies four, satisfies one that could be disputed, and doesn’t satisfy one. And the one it fails to satisfy is the one I’d argue is an unnecessary requirement.

What if we compare that with paper money? Paper money is not metal or food. Because of inflation it is not durable, but devalues over time. Its value is not intrinsic, but comes from legal tender laws that obligate its use. Its price is not determined by supply and demand, but set by central planners. Paper money only fulfills two of these requirements. It is abundant, and it functions as a medium of exchange, and even then only because it is required by secular ­­­­law.

At best paper money fulfills two of the six traits of money in Islamic law, while Bitcoin fulfills four or five. So, Muslims who regard paper as money should certainly regard Bitcoin as money, probably more-so, and Muslims who reject paper money and are searching for alternatives should take a long hard look at Bitcoin. We operate in a market where physical precious metal is not nearly as prevalent among the common people as it was in the past. I see a kind of balanced elegance to the fact that in the past food based economies resorted to food when precious metal was scarce, and today our digital economy may resort to digital currency when precious metal is scarce, or even criminalized. So, I’m calling it money. You can certainly disagree if you wish. But I’ve got a donation waiting for the first Zakat eligible charity that accepts Bitcoin.

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53 Responses to “Is Bitcoin Sharia Compliant?”

  1. Seth KingNo Gravatar says:

    Great article Davi! Very informative!

    Have you really spent any time at all broaching this subject with your Islamic peers? Or were you waiting until you have a mini-thesis published first to refer them to?

    It would be interesting to get some reaction from your peers on this matter. As an outsider, I have to say you make a very compelling argument.

  2. Hi Davi, thanks so much for this article!

    I had the very same intuition as you regarding Bitcoin and Islam, so I attended to the last World Riba Conference, hoping to find a an answer, or at least a lead. Professor Ahamed Meera had the kindness to spend some 1 or 2 hours discussing the topic with me (and he actually mentioned it in his presentation http://youtu.be/NDXLT_tPWBo?t=14m10s).

    First of all, if I understood correctly, we can say that Bitcoin is not haram, because not imposed on people against their will. But, to address the fact whether or not it would be halal, we need to submit it to a pool of scholars. As the topic is very hard to graps, even for geeky brainiacs who use Bitcoin, some work needs to be done upstream to present Bitcoin in order to address its technical aspects in perspective of Shariah requirements.

    The first concern of professor Meera is the tangibility of Bitcoin. For me, as I understand it now (it took long!), it is tangible. My way of putting it is that Bitcoin shares many properties with gold, the main difference being the fact the properties of gold are enforced by the laws of physics, when the properties of Bitcoin are enforced by the laws of mathematics. It “clicks” in my brain this way, but I’m not sure it is the right way to put it. He is another interesting way of addressing the issue http://www.youtube.com/watch?v=YHVVi7M4jbo&feature=youtu.be&t=12m 57s

    I think it worth continuing digging the topic, I understand your frustration regarding the lack of interest about the topic, but I think that Islam economics are not that less interested in Bitcoin than any traditional economic system, none are for the moment, it’s too early and to difficult to understand. However, I do think that that the synergy between Bitcoin and Islam has an incredible potential, it worth keeping an eye on this. Thanks for your work, do not hesitate to contact me if you want to push the topic forward, it feels good not to be alone on this anymore!

    BTW, I would like to comment on your article a bit:

    - I think that crypto-commodity is a better definition than “digital currency” for Bitcoin. A commodity used as money is a better match that currency it think, and Bitcoin being digital is not a very good aspect of the technology, it could work on other medium than digital mediums, I think it first important aspect is being based on cryptography (or mathematics).

    - Flash drive is a bad idea to keep you Bitcoins, you’d better print the private key of your wallet on paper (or engrave on marble!) with dedicated software such as Armory: https://github.com/etotheipi/BitcoinArmory

    Thanks again!

    Camille.

    • Seth KingNo Gravatar says:

      Bitcoin armory is very nice. But yes, that was a deficiency in Davi’s article. The truth is you can make an infinite number of backups of your Bitcoin, just in case your home burns down, or you get robbed, or whatever, the more copies you have of your Bitcoin wallet, the better.

      And then of course you can encrypt your Bitcoin wallet, which means that even if somebody steals a copy of your wallet, they will be unable to spend any of your Bitcoins.

      Bitcoin is a very safe currency as long as the user isn’t careless.

  3. AmedNo Gravatar says:

    Zakat is for Fi Sabeelillah: Those who are away from home in the path of Allah. Those in Jihaad.

  4. AndrewNo Gravatar says:

    I don’t understand this Bitcoin thing… The web http://thebitcoinmaster.blogspot.com doesn’t help me…

  5. KhalidNo Gravatar says:

    Hi,

    Thanks for this good article. I’m a Muslim, an I’m in Gold since 2008 and Bitcoin since 2011.

    Yes we need to bring such a topic such as Bitcoin to Islamic scholars for further study and analysis.

  6. MAMNo Gravatar says:

    How many muslim anarchists do you know Davi? And how do reconcile your earthly anarchy with the need to submit to Allah? Why are you a muslim? Are your parents muslim, is your religion something you’ve always had and now it’s just a habit?

    Just being nosy, anyways good luck!

  7. Wreck RodNo Gravatar says:

    It will be totally awesome to see Gold Dinar, Silver Dirham, Copper Fulus and Digital Bitcoin working together as a Global Currency for all mankind and we can finally abolish the Interest Scheming Fiat Currency once and for all. Dinar, Dirham, Fulus and Bitcoin are the True Wealth and Real Fortune for everyone as they are Interest Free Honest Money.

  8. Jan BergstraNo Gravatar says:

    Davi Barker’s post is quite instructive about a timely topic. It is not yet conclusive, both in the scope of the analysis and in its final judgement. Below I hope to add another consideration about the same issue that may be considered of relevance. This pertains to Bitcoin mining.

    Bitcoin mining is practically a lottery. Miners can invest in fast and dedicated machines for computing a particular SHA-256 preimage for a (partially given, by way of a number of initial zeroes) bitstring, as they are supposed to do, and that search is performed by running a program that executes a deterministic algorithm. These aspects don’t contradict the lottery status of the mining process in my view.

    Here one can disagree with the argument if one assumes that lotteries are supposed to be necessarily non-deterministic. That viewpoint, however, implies that lotteries cannot exist in a deterministic world. Determinism, however implausible that may seem, cannot be excluded as a philosophical option in favor of its counterpart indeterminism. I conclude that a deterministic philosophy will also acknowledge the existence of lotteries, and that for that reason “essentially deterministic lotteries” (such as Bitcoinm mining) must be accepted as a concept.

    Of course accepting the concept of a deterministic lottery philosophically is not the same as accepting such methods method ethically. Based on these considerations deterministc lotteries can conceivably be rejected as a method for earning financial advantage.

    This argument may render Bitcoin mining non-compliant with requirements of Islamic finance, at least assuming that BTCs are taken to have any value at all.

    Bitcoin users, who buy BTCs through an exchange and transfer when making payments of goods, are depending on the work done by miners for validating their transfers. That might render the use of BTCs as a means of exchange problematic as well.

    These arguments do not depend on whether or not Bitcoin is considered a money. A redesign of the mining process, and to some extent making transfer validation depending on trust rather than on competitive expressions of distrust, might change the matter.

    • You can make gold non-shariah compliant following this logic. Mining gold is lottery. Most of critics regarding Bitcoin are the same that can be made to gold.

    • AbdullahNo Gravatar says:

      Assalam alaikum. Look up pool mining. When pool mining is done, you get a mostly-reliable source of coins, that can be predicted pretty accurately without much risk to the user.

    • Kaios.JfdsNo Gravatar says:

      Wait, but isn’t lottery haram because you don’t have to work hard for it?
      Minning is not haram because you take the gold out of the soil at the sweat of your brow.
      But for the Btc, it’s (almost) random.
      It’s just my opinion so…

      • HantuNo Gravatar says:

        Yes Bro Kaios.Jfds,

        I agreed with you, as mining BTC and Gold is a pure luck, as you mine Gold and if you so lucky to struck a stash of Gold then that is your reseki from God, just like BTC mining where if you are lucky to find a block, it all pure random. Can’t cheat that.

        Lottery is harram yes indeed but not BTC, if BTC is harram, then Money is harram too.

        Very nice to see many view on these. I am glad to be in the group.

  9. SeverusNo Gravatar says:

    Brother ,there is one big problem! I also researched bitcoins and found out ,that one thing in bitcoins is haram: MINING!

    If you mine bitcoins you get bitcoins, this is not the forbidden part but you use your machine power to ecure and encrypt the network of people who also do bad stuff with bitcoin! This means that the system contains bad people which you are protecting by mining coins! You may not know who the person will be you will secure with your machine, but you know you will do it soon! THATS why bitcoin mining is not allowed!

    • Seth KingNo Gravatar says:

      Are people who mine gold also guilty of haram? Because people definitely use gold for nefarious purposes as well.

    • Hi severus, thank you for this interesting remark, indeed, this point hasn’t been covered in this discussion yet. However, as you may have noticed, this post is entitled with a question mark, and despite the fact that it’s opened for almost a year, with many comments, no one ever dropped a verdict telling whether or not Bitcoin was Halal or Haram. People are just exchanging points of views, remarks and deductions, seeking for “thruth”, if possible. The way you hammered your verdict on our heads makes me wonder if you are really seeking for “truth”, if you just want to make a point, or if you wanted to force an a partial and negative opinion you had about Bitcoin beforehand, thus, hiding a weak argumentation behind authoritarian rhetoric. I would prefer that you phrased this very interesting point as a question, such as “Is validating random transactions without knowing the legality of their corresponding deals Halal?”.

      Anyway, I assume that you are also seeking for truth about this topic, despite this somehow clumsy rhetoric. Indeed, suspicion is a sin, and that’s also my point regarding this issue.

      If you introduce systematic suspicion in economic exchanges, you may also make gold Haram. If someone steals a gold coin, he does it knowing the fact that he can spend this coin later on. It is the presumed validation of the next transaction (spending the coin) that make the initial robbery of the coin possible. So, following your logic, accepting any gold coin would be Haram because it could possibly validate a Haram act. But, you can’t know if a Haram act ever took place without being suspicious (which is a sin), when you accept a gold coin or when you mine Bitcoins.

      However, is think your remark is very interesting, and very possibly pertinent in the case that you know, without being suspicious, that this or that Bitcoin address is involved in Haram activities. Thus, it might be a interesting added value service for Muslims to have an “Islamic pool” which would avoid mining block containing – for sure – Bitcoin addresses involved in Haram activities. But, the way these addresses are collected/reported should be taken care of with high precaution, avoiding suspicion, spying, denunciation, etc. And also make sure that it cannot be used to “freeze” any Bitoin address via FUD or slander campaigns, which might make this kind of pools becoming an unfair economical weapon. Of course non-Muslims might validate theses transactions automatically, but this kind of “ethical pool” might also get the interest of non-Muslims, thus, be implemented widely, which might potentially transform the concept into an economical weapon.

  10. severusNo Gravatar says:

    Thats a wrong analogy because the bitcoin network needs miners! If you have people in the network who use the anonimity to sell drugs AS example then you secure their Transaction! Thats the cause why Bitcoin mining is not allowed!
    You can not controll which transaction you want to secure and you always secure good and Bad transactions. The knowledge that you know that your meiner supports those criminal transactions makes your Bitcoin earning haram

    • Seth KingNo Gravatar says:

      Roads and telephones support criminal activities as well. I guess that’s also haram. So is food and water.

      If a public ledger(which is all the blockchain is) is haram, then I say I’m guilty as charged!

      Have fun using your government issued fiat! I guess that’s perfectly okay.

  11. EmiNo Gravatar says:

    I vaguely recall one of Imam Hosein’s lecture in Malaysia, where he predicted that the next evolution of money will be into digital currency (1′s and 0s). It was a lecture on “Sound Money”.

    Personally, I have doubts on whether bitcoins are halal, and that doubt alone is enough for me to stay away from bitcoins in its entirety. My personal belief is that if you’re aren’t sure if it’s halal, why would you approach it, let alone immerse in it?

    I feel it’s safer to stick on the sidelines for this one, until an official judgement has been passed on its legitimacy under Islam (which could probably take years).

  12. @Emi, you are right to be cautious. I hope you are as cautious with fractional reserve debt money from banks which is that is obviously haram (interests = riba), and government paper money (might not have interests, but monopolistic currency is haram, money can’t be imposed on people). Bitcoin is not digital, it is mathematical. What Imran Hosein means is by digital is replacing ink by digits, this is not the case of Bitcoin. Bitcoin replaces the laws of physics that governs gold by the laws of mathematics, it’s sufficiently different to be considered as a serious candidate for being halal, however, you are right, it requires judgment. I hope that elder learned Muslims will take a look at the topic. I discussed with Ahmed Meera about this, he told me that it worth making a request, but I don’t know how to apply for it (I’m in France).

    Bests,

    Camille.

  13. AhmedNo Gravatar says:

    There are 2 issues I see where Bitcoins would conflict with core principals of Islam:

    1- Buying money with money (EUR/GBP/USD with Bitcoins).
    Money is created to facilitate a system where people could trust a value of a STABLE currency and buy goods, services with it. Solving math formulas doesn’t really help anyone in Bitcoins community or outside – it just makes it increasingly harder to mine Bitcoin. So what are we doing with those formulas? if nothing, are we exchanging fiat currency with nothing? what’s the world is coming to!!

    2- High speculative nature of currency.
    You can argue that fiat currencies are speculative as well, but that’s in international markets. If in your country, say USA, you pay $1000 for rent, $100 for weekly shopping…etc, that would be what you pay for months if not few years. Some prices may go up or down, but that you won’t be paying $2000 for rent and $200 for shopping overnight or within few weeks.

    This causes major problems for merchants selling goods or services. If you say sell a car for 200 Bitcoins, the next day it may cost 50 Bitcoin, but if Bitcoins crashes the following week, well, you will go under and close shops – because you the Bitcoins won’t probably pay the garage bills. Besides, prices will change daily based speculations rather than setting a price based car specs, performance…etc. Fiat currencies values are based on country GDP, which is more complex and harder to achieve than circulating rumors in mainstream media.

    The majority of people buying Bitcoins are in it to make a profit from these speculations. The other part is to be able to move or hide elicit money. Early adopters may have invested out of interest when it was few dollars, it’s no longer the case. Also, mining Bitcoins these days will cost more in electricity and equipments that the return, but some are still at it because they speculate it will be worth more.

    Finally, do you see the world governments agreeing to adopt Bitcoins one day? I would say no, simply because they can’t track, tax, regulate…etc. It’s just out of their control. Are we as Muslims going to be buying money with money that is subject to high speculations and controlled by a possible minority (those how owns most of them)? is this taking people’s money for nothing (AKLO AMOUAL NASS BE BATEL)?

    God knows best.

    • Davi BarkerNo Gravatar says:

      Some clarifications:

      1) You don’t have to buy bitcoin. I never have. I’ve only ever accepted it as payment for goods and services. The only I can recall buying money with money was when I went on Hajj and had to deal the money changers outside the temple… er… I mean the currency exchange outside the Prophet’s Mosque. So, currently fiat money doesn’t solve this problem either.

      Interesting factoid. If you go to Coinabul.com they have charts were the price of Bitcoin is paired with the price of precious metals and it’s much more stable relative to gold and silver than it to dollar. Makes sense if you think about it. But, the fact is gold and silver, which are traditionally championed as honest money, are also unstable at times. The features of currency can summarized in two characteristics. Stability is only one. Liquidity is also fundamental. So the market will gravitate toward whatever monetary unit scores highest on an index of stability and liquidity. Gold is more stable and less liquid. Bitcoin is more liquid and less stable. If the government gets out of the way the market will be free to innovate ways to make gold more liquid, and bitcoin more stable, but for now government prevents those measures. So, it is a subjective calculation for each user.

      The proof-of-work problems are not what make Bitcoin valuable to people. They are what make Bitcoin scarce, which is important. Similarly, the number of electrons in a gold molecule doesn’t help anyone, or hardly anyone, but it’s important to the science of gold. Because gold is based on the laws of physics, and bitcoin is based on the laws of mathematics, which are equally immutable. What makes Bitcoin valuable to an increasing number of people is the potential for privacy in their economic life, while also granting access to an uninterrupted global market, and we know these features are valuable because merchants expended great resources achieving them before the advent of bitcoin.

      It’s simply incorrect to suggest that prices to not sway widely in fiat currencies. In fact, people tolerate the volatility of bitcoin in the present because they hope to avoid the volatility of the dollar in the future. The dollar is an inflationary currency. It starts out stable and becomes more volatile over time as regulators struggle keep it afloat until an inevitable hyperinflation when you absolutely will see a doubling of prices days or weeks apart, and then a collapse. Bitcoin is a deflationary currency. It starts out volatile but becomes more stable over time as the market seeks and finds the price point of a limited resource. Bitcoin is speculative in international markets, and if the volatility is too much for you maybe bitcoin isn’t right for you. But you certainly shouldn’t deprive other people from taking those economic risks in an effort to stabalize the currency for mass adoption.

      For me, the volatility is not a major problem, and I am a merchant. Bitcoin goes up, I take bitcoin. Bitcoin goes down, I still take bitcoin. I tolerate the volatility because I believe in the long term health of the currency. I don’t day trade. I don’t speculate about the price. I believe that bitcoin is a superior currency to the dollar, so I would rather people gave me bitcoin than dollars for my goods and services. If they agree, who is the victim?

      You’ve acknowledged the risk of circulating rumors in mainstream media, but you seem to believe those rumors. I’m not sure how you could know, other than mainstream media reports, that the majority of bitcoin users are attempting to profit from speculations, or engage in elicit activity. The only survey that’s been done found that the majority of bitcoin transactions were for charitable donations, but that’s not what the media reports.

      During the gold rush, there was a price point where mining became more expensive in equipment and labor than the yield of a day digging. Some miners found other professions, and other speculated that there was a big score just over the next hill. It’s no different.

      Finally, I sure hope the governments of the world keep their hands off of Bitcoin, but that’s an unreasonable standard for what you consider currency. No government in the world has adopted gold and silver as currency. That doesn’t mean gold and silver are worthless, or that they don’t exhibit more of the traits of honest money than the dollar. I’m not putting forward bitcoin the only valid currency, but one currency in an ecosystem of competing currencies. And in that ecology bitcoin has more survival fitness than the dollar, yet people use the dollar everyday, while rejecting bitcoin. Seems like we’re due for a correction.

    • Hi Ahmed, can you source the requirement of a Halal currency to be stable? If it is indeed a requirement, then it’ll be solved in 5~10 years from now. Obviously the price of Bitcoin is actually unstable because of its youth. However, as Davi mentioned, you shouldn’t check the fact whether a money is Halal or not with a Haram money as a referential. E.g. you can compare the stability of Bitcoin with gold. However I’m not sure about the Shariah compliance of such trades, as Muhammad (pbuh) said: “Gold for gold, silver for silver, wheat for wheat, barley for barley, dates for dates, and salt for salt.”. But I didn’t really studied this latest topic, yet.

  14. LebonNo Gravatar says:

    Islam’s only problem with Bitcoin is that it has no intrinsic value. So it can’t be accepted as money or medium of exchange.

    Never the less you’d still have to pay Zaka on it since it’s wealth. Please note that Zaka is on wealth and not only on precious metals, food and animals.

    These are the most obvious components of wealth. You have to calculate 2.5 percent on each of those separately but you’d still have to pay 2.5 percent on paper money savings (not your income) also 2.5 on land and properties other than the ones you use.

    • Hello Lebon, did you read my first post (and the linked videos)?

      First, saying that Bitcoin has no intrinsic value is just a postulate. Please watch the Trace Mayer explanation, learn more about math (which is the transposition of law of physics, including its intrinsic constraints) and take a closer look at Bitcoin cryptography. The argumentation is open, so please clear that point before building an argumentation upon it.

      Second, as I discussed with professor Ahamed Meera: there are some requirements that make a money Halal, and some other criteria that makes it Haram. This discussion is focusing on whether or not Bitcoin is Halal. But, you made another postulate (based on you first one) stating than Bitcoin is Haram. I must say that this point has been cleared with professor Meera very quickly: Bitcoin is not Haram. Why? Because anything can be used as money in Islam as long as it is not imposed against people’s will. Any money that matches this single criteria is not Haram (but it doesn’t mean that it is Halal). If you want a money that must be universally accepted (like gold), then it has to be officially Halal, to do so, a judgement (by elder learned Muslims, following strict requirements) has to take place. We do not have the authority to do so, we are just doing the spadework.

      Camille.

      • Davi BarkerNo Gravatar says:

        Camille,

        Can you connect me with the relevant works of professor Ahamed Meera? I’ve never heard of him, from based on your comments it sounds like he’s another modern scholar writing about monetary policy, which I’m very interested in.

        Peace
        Davi

  15. EmiNo Gravatar says:

    Hi Camille,

    I suppose BitCoin can be viewed as haraam as the nature of it right now is more speculative. I know of many people who are now buying into BitCoin because they want to make a quick buck out of it.

    My next question if I may is, do you have any bitcoins at the moment?

  16. Hi Emi, if a money becomes Haram because people speculate on it, then gold, silver, wheat, barley, dates, and salt become Haram: http://www.rollingstone.com/politics/news/everything-is-rigged-th e-biggest-financial-scandal-yet-20130425

    Yes did purchase few Bitcoins last year (to convert my Haram Euros), and a ASIC miner. I still have both. I don’t focus on their value in Haram money, I keep it until I can find the proper activity to do with it (unless I’m financially constraint to sell it to buy food). For the moment I am considering buying a new ASIC miner with it, because it’s an non-speculative investment (risky, like gold rush, but doesn’t create value out of nothing) that enforces the Bitcoin network. But I didn’t yet.

    Camille.

    • Well, to be fair, I do look at the BTC/USD/EUR exchange rate when considering to buy a miner, because they are sold in USD/EUR. When the price is high (it’s more because of hype, buzz and rush than speculation) it worth more buying a miner. Howerver, if I do sell my Bitcoins for USD to buy a miner, I know that the overpriced Bitcoins value (at that time) will not fall into the pockets of speculators, but into real world manufacturer’s one. Also, I do enforce the network (in the real world), and I may make some profit if I’m lucky (not in a gabbling manner, but in a gold rush manner). But, I didn’t do it yet, still thinking and observing.

  17. EmiNo Gravatar says:

    I don’t quite understand what you mean when you say mining BitCoin isn’t creating value out of nothing.

    And I’m sorry but if you have bitcoins, then wouldn’t you already have a vested interest in them? So whatever research you are doing, you will have a natural bias to want to find answers that will support what you’re doing.

    It’s different if someone who hasn’t dabbled yet in BitCoins, and then proceed to find out if it’s in line with Islamic principles before going anywhere near it.

  18. Hi Emi, I think the best answer I could give is to invite you to mine some Bitcoins (even with you computer) to figure out that it’s not “out of nothing” regarding the effort and investment it requires. Sometimes practice is better than endless arguments and theory. For the rest, I’d recommend you a method that we used often and which is quite efficient: just replace Bitcoin by Gold in your sentences and see if your concerns are still relevant. I do not have the authority to say if Bitcoin is in line with Islamic principles, the fact that I dabbed in Bitcoin before won’t change the official judgment establishing the fact that whether Bitcoin is Halal or not.

    • AhmedNo Gravatar says:

      Bitcoins should not be compared with gold or silver. I know both are speculative, but the speculation on Bitcoin, especially with recent media interest is just unrealistic and outright taking people’s money for a value that doesn’t really exist. Why?

      When you mine Bitcoins, you invest CPU power, memory, time, bandwidth, electricity…etc. But what do you do with it? solve math formulas that no one seems to benefit from – Bitcoin never made this clear. It’s like part of philosophy, non believes/atheists will spend years and resource debating if humans, God and even life exists!!

      Gold, silver has value because it goes into production for something. It’s precious because it lasts and used to make jewelries and many other goods, including smart phones.

      What actual value does Bitcoin produce in tangible or non-tangible form? other than make it harder and harder for computer to create more of them as more are “mined”.

      • Davi BarkerNo Gravatar says:

        Ahmed,

        What I’m doing in this article is not comparing Bitcoin to gold. I am comparing gold, Bitcoin and dollars to an Islamic standard for the definition of money. Bitcoin appears to fall short at first glace, but it falls much closer than dollars, or any of the fiat currencies used in so-called Islamic countries.

        However, the mining of Bitcoin and the industrial use of gold is an unfair comparison. The mining of Bitcoin should be compared to the mining of gold. You invest back breaking labor, explosives, construction, equipment, and in the end you have moved one pile of dirt into another pile of dirt, which no one really benefits from.

        Of course… it’s not really true that no one benefits from mining. There is residual benefit to mining in both fields. If a less precious mineral is discovered in the mine which the gold minor wasn’t interested in, suddenly the mine because incredibly valuable to whoever wishes to mine the secondary mineral because much of the work, the investment, has been done.

        Similarly, the advent of Bitcoin has created an economic incentive to develop dramatically faster and more powerful processors beyond anything previously affordable at the consumer level. That innovation will have other industrial uses, for video games, for independent films, for any extremely complex computational program which is currently unimaginable due to the bottle neck of computational power.

        As for the industrial use of Bitcoin itself, that is not for Bitcoin to make clear. Gold did not come with microscopic instructions embedded in it’s molecules. That is for inventors and innovators to discover. But the protocol can absolutely be used for more than a currency or a speculative asset. Fundamentally, what Bitcoin provides is consent confirmation. Any use that a contract, a signature or a handshake has in industry or commerce can be handled by Bitcoin, or a similar blockchain protocol, which removes the need for a third party to witness or record a transaction.

        We know that consent confirmation has intrinsic value because people paid for it prior to Bitcoin’s existence. Paypal takes a percentage, and yet stays in business. Notaries charge a fee. The country recorder collects a tax. People in industry and commerce pay for third party consent confirmation, and Bitcoin removes the third party.

        • @Ahmed I do not think that the first reason that gives value to gold is its industrial use. I think it’s more because it’s scarce, “unfakable”, firstly granted to those who mine for it, not linked to a central authority, and relying on Mother Natures’s (or God) laws (maths, physics, etc.). Many of its properties are shared with Bitcoin, but not all. Does it mean that it’s not a good type of money? I don’t think so. Telling that Bitcoin has no value because you can’t touch it is as relevant as telling that gold has no value because you can’t transfer it via the Internet. Gold has physical tengibilty, Bitcoin has mathematical tengibility, it’s different, not opposed.

          I would say that there are 3 types of money, that we can represent on a scale:

          - commodity money, that intrincitly holds its value within itself (gold, rice, etc.), that I would qualify as “positive” money, represented as +1 on the scale.
          - fiat paper money, that worth the number written on it, related to the trust given to the entity that prints it, I would qualify it as “neutral” money with the position 0 on the scale.
          - debt money, representing a value that is owe, that I would qualify as “negative” money, placed at -1 on the scale (we could add debt money with interest at -2 as well :-p).

          According to that, I think that we can reasonably place Bitcoin between +0.5 and +1 on this scale, even if, indeed, you can’t physically touch it.

          @Davi I discovered Dr Meera’s work on this conference that he gave with Sheikh Imran Hosein, I think it’s a good start: http://www.youtube.com/watch?v=JnEsIXsO91Iy He is the dean of the University of Islamic Law in Kuala Lumpur. I also discussed about Bitcoin with Shaykh Umar Vadillo who has a lot of knowledge and experience in Islam economics, you can find some of his work online, very enlighting :-)

          Camille.

        • MoonShadowNo Gravatar says:

          Bitcoin (the network protocol) will eventually take over almost all of the functions of the public notary, registrar, county clerks’ office, etc. These occupations exist only to act as a witness to the lawful transfer of property, which is a function that the blockchain can perform for just about any asset, not just definable volumes of bitcoins (the currency). These same occupations are what modern businesses call “cost centers”, as the professionals that perform these functions do not produce any marketable product. In the not too distant future, I expect that many automobile titles will reference a bitcoin asset “colored coin” and not a particular person, thus showing whomever controls the private key associated with that coin, owns that vehicle. Perhaps, with the advancements in automotive computer equipment, the car itself will be able to recognize the valid transfer of it’s associated “coin” and respond to it’s new owner by way of an app on their smartphone (similar to Zipcar) without so much as the need to exchange ignition keys. We live in exciting times.

  19. EmiNo Gravatar says:

    Thanks for the reply, but I will have to politely decline your invite to dabble in bitcoins.

    I feel it’s akin to asking me to eat a newly discovered meat, without first determining whether it is permissible or not. I may have to err on the safe side for now, as I am without the proper knowledge to proceed.

    JazakAllah khayr for your responses thus far. :)

  20. Wa Iyyaakum Emi, I admire and respect your prudence.

    BTW, as I mentioned before, what I’m investigating in here is the spadework around the fact that Bitcoin could be or not Halal. The fact that it is not Haram to use Bitcoin is established in the present situation (because not imposed against people will, at this precise moment at least).

    Bests,

    Camille.

    • Emi, you do not have to eat the meat, I suggested this method as a shortcut, you can simply study how it’s made without touching it. Just search for “mining bitcoin” in your search engine, and you’ll what it takes, how math unexpectedly face physical constraints.

  21. bobNo Gravatar says:

    LMAO insane people justifying their idiotic lifestyles and beliefs in sky fairies, you muzzies crack me up!

  22. MuhammedNo Gravatar says:

    If the servers or the machines through which Bit coins are transferred or interchanged are damaged or corrupted or destroyed all the Bit coins a person has will be of no use and nobody can guarantee the safety of these machines until Islamic Caliphate is spread all over the world.
    But what I want to know ” is Hajj Halal with paper Money and is paper money haram?”

    Thank You

  23. MuhammedNo Gravatar says:

    I would also like to say that I gained some good knowledge through this site.

  24. Young EconomistNo Gravatar says:

    A very comprehensive article. Nice job Davi! You’d better write a journal or a paper discussing bitcoin in Islamic perspective. I think this is the first article comprehensively discussing bitcoin in Islamic perspective.

  25. Ali HamzaNo Gravatar says:

    jazakAllahu kheiran , am seeing bitcoin as the way of defeating the usury laden wall street’s control of masses.

  26. HantuNo Gravatar says:

    Bitcoins is not Gold, Silver or Money. It’s just Bitcoins. People wish to trade with Bitcoins to purchase things that is good enough, just like the old days. Don’t care of the value up or down with other fiat currency. When 2 people agrees and set the value, that is the exchange value. That’s only happen after all the fiat currency is gone. Gold, Silver and Bitcoins.

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