I know the owners of this website are doing a great job but still, I don’t want to rely on something blindly I want to do research myself because sometimes we find coins that are not on the list so it’s better we learn the procedure.
1. I use ChatGPT to get information related to the crypto project after deciding if their technology is haram or halal.
2. Then I check if they are involved in gambling/interest or anything like that
3. Then I go for fixed rewards
4. The last and final step for me is partnerships which is confusing me a lot in my research process because almost every coin in the crypto space has some haram partnerships either with a haram defi project or with a haram company like Netflix which promotes entertainment or anything like that in this way all the crypto coins become haram?
I recently got the answer from 1 of the admins of this group who said there is a rule of 5% that if 5% of the total income is from the haram resources the stock is generally considered halal if we apply this rule in crypto isn’t it true that majority of the coins income is from it’s core technology ? Then should we ignore partnerships? What’s the use of looking at them?
To research whether a cryptocurrency could be considered halal, you’ll need to carefully evaluate several aspects of the coin and its ecosystem. Here’s a step-by-step guide to help you through this process:
1. Assess Legitimacy (High Priority)
Start by verifying the coin’s legitimacy, as this is crucial for determining if it aligns with Islamic principles:
a) Blockchain Verification: Look for reputable blockchain explorers that confirm the coin’s existence and operations.
b) Official Documentation: Check for clear, comprehensive documentation outlining the project’s goals and compliance efforts.
c) Third-Party Audits: Seek evidence of audits by trusted cybersecurity firms or regulatory bodies.
d) Whitepaper Analysis: Read the coin’s whitepaper to understand its purpose and technical details.
e) Team Credibility: Investigate the team behind the coin. Transparency about team members and their credentials is a positive sign.
f) Claims and Promises: Be wary of coins making unrealistic promises or guaranteeing returns.
g) Media Coverage: Look for coverage in established media outlets, which can indicate legitimacy.
h) Website and Presentation: Evaluate the coin’s online presence for professionalism and transparency.
2. Examine Project Details
Delve deeper into the coin’s operations to ensure they align with Islamic principles:
a) Technical Operations: Understand how the platform works, ensuring it doesn’t involve prohibited activities.
b) Revenue Streams: Examine how the coin generates revenue, avoiding those reliant on interest-based income.
c) Financial Services: Look for details about any associated financial services, being cautious of interest-bearing loans or speculative derivatives.
d) Partnerships and Activities: Check for any involvement with industries that may be considered haram, such as gambling or alcohol.
3. Evaluate Financial Structure
Assess the coin’s financial aspects:
a) Financial Status: Review the coin’s funding sources and current market status.
b) Debt and Financial Instruments: Ensure the coin’s structure doesn’t rely on interest-bearing debt or complex financial instruments that may be considered gharar (excessive uncertainty).
c) Financial Transparency: Look for clear financial reports and disclosures.
d) Financial Audits: Check if the coin has undergone financial audits to verify regulatory compliance.
4. Analyse Tokenomics
Examine the coin’s token structure:
a) Token Distribution: Review the allocation of tokens, ensuring it’s fair and transparent.
b) Founder’s Allocation: Be cautious if founders hold an excessive portion of tokens (e.g., more than 30%).
c) Distribution Mechanism: Look for clear documentation on how tokens are distributed.
d) Speculative Elements: Identify any aspects that could lead to excessive speculation or unfair governance.
5. Understand Staking Mechanisms
If the coin offers staking, carefully evaluate this feature:
a) Staking Process: Understand how staking works, including rewards and how they’re generated.
b) Terms and Guidelines: Look for clear guidelines for staking participants.
c) Fairness and Transparency: Ensure the staking mechanism doesn’t exploit users or violate principles of fairness.
6. Verify Regulatory Compliance (High Priority)
Ensure the coin operates within legal and ethical boundaries:
a) Local Laws: Confirm compliance with relevant laws in its operating jurisdictions.
b) Anti-Money Laundering (AML) Measures: Verify the implementation of robust AML and Know Your Customer (KYC) processes.
c) Industry Standards: Check adherence to established industry guidelines and standards.
7. Evaluate Use Case and Adoption
Consider the coin’s practical applications:
a) Real-world Uses: Identify genuine use cases that provide value.
b) User Base: Assess the current adoption rate among individuals, businesses, or institutions.
c) Utility vs. Speculation: Determine if the coin has real utility or is primarily driven by speculation.
8. Consider Scalability and Future Potential
Look at the coin’s long-term prospects:
a) Project Roadmap: Review the coin’s plans for future development.
b) Development Initiatives: Look for efforts to address technical challenges and improve performance.
c) Adaptability: Assess the project’s ability to evolve with market trends and regulatory changes.
By thoroughly examining these aspects, you can make a more informed judgment about whether a cryptocurrency aligns with Islamic principles. Remember, it’s always advisable to consult with a qualified Islamic scholar or financial advisor for a definitive ruling on the permissibility of a specific cryptocurrency.
Some of these steps may not be essential, but we try our best to scrutinise everything in our persuit of halal investments.
Hope this helps.
