Bitcoin in Islam

Status of Bitcoin Currency as per Islamic Point of View 

Islam is a religion that is rapidly increasing. There are about 23% of world comprises of the Muslim community.  That is the reason that it is necessary to discuss whether the religion has given any space to the bitcoin system or not.  The Bitcoin is a virtual or digital currency that can be converted into real money. It is mining through different ways whereas there is no third party involved in it. On the other hand, we have Islamic system that presents its own valuable economic and finance systems. According to Islam, the money has its definition. An Islamic principle is a free market principle. 

The religion considers the commodities and these are with an intrinsic value of the currency. The product that can be used as currency is the gold dinar, silver dirham, dates, salt, rice, wheat, etc.  The paper or electronic money is utilized in a way that the paper is considered as a contract. It can be redeemed for the measure that is fixed weight of the particular commodity. Gold backs many currencies in the world.  Only the government has the authority to redeem the paper, not a citizen.  The market sets the commodity cost.

The price of the product is also dependent on the paper money as it may increase or decrease in value. Islamic sharia has its rules. The Islamic financial system is different from that of others. Islam forbids the use such currency that has relation with the debt that is also called rib. Islam has not allowed the charging and profit taken from interest those are paid on loans. The reason is that Islam considers the money as a mean of exchange.  The permitted currency in Islam required to be a sharing of both lose or profit.

All that means that the allowed currency must have an attribute of deflationary in its nature and it should be able to resist inflation and it must have the market price of steady characteristic.  The flat currency has its features. It is based on the interest and the debts. Technically it is not allowed, but dealing has made allowed, and another part is not favored.  The currency trading is not allowed in the Islam.  The case of Bitcoin is different. The money is earned through mining. The process receives an amount in exchange for transactions.

In this way, a new bitcoin is earned. There occurs no surprise in its supply. The reason is the circulation, proof of work, cryptocurrency with the hardware and other electronic cost and thus all these made it a currency having intrinsic value. All that process makes it halal. The evidence is that there is no debt system. Gold and silver are allowed currencies, and the mining of Bitcoin is challenging and can be compared to the mining process of gold and silver.  The laws of Islam required that a currency must have an intrinsic value so does the Bitcoin has as this digital currency fits that definition.

The worth of the currency cannot tamper e.g. through duplicate or any other illegal ways.  To understand completely about the bitcoin, we must make an understanding of bitcoin mining. Mining is a process in which the transaction and other operations take place.  The process of mining involved the compiling of the latest transaction into the blocks. A mathematical or any complicated puzzle or question or problem is required to solve. It is an arduous process. It demands time cost and exceptional efforts.  There is a blockchain that is also called a ledger, and each new block is added at the end of the chain.

It is what the beauty of the chain and system. The block contains the record of data. So far as the problem solving is concerned, the participant solves a complicated problem and makes a new block. The addition of block is associated with the awards as well. The reward not only incentivizes the mining but also include the transaction fees that are paid to the person in the form of bitcoin.  It is a complete security system in which the verification takes place. A single address is granted to the single block, and no repetition occurs in it.

The software keeps the chain of blocks smooth so that no interruption occurs to replace or make any space among the already existing blocks. The efforts are very hard to earn the coins. The characteristics, processes and thus the complete details under the Islamic details have proved it an allowed and halal currency.  There is no objection Islamic sharia for the bitcoins e.g. for is payments and the receipts etc.  Risk sharing is reasonable, but a person must have the knowledge about the risk sharing. An ignorant person and especially with a low-income person must have known about it. A person should be aware that the Bitcoin mining is time-consuming. Hence the decision made in this regard must not be ignorant of basics.