Halal Business

The Amazing similarity of Blockchain and Islam

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This article is co-authored by Dr Mohammed Obaidullah and Mohammed Naqiub first apppeared in IBF net blogs

Editor’s Note: This article is the best explanation of blockchain that resonate with Muslims. Now even your local vilage imam can understand blockchain

The conceptual foundations of blockchain technology have a strong ethical dimension. It is usually associated with terms, such as, transparency, verifiability, traceability, immutability, all of which are bracketed with economically and socially ethical behavior.

It is trust-inducing and involves consensus-building, which further underlines its ethical roots. And its emergence in recent years is a response to the failure of many traditional institutions that are supposed to guard against fraud and unethical behavior. Simply put blockchain is born out of the quest for a more equitable or just economic system. 

What is blockchain 

As such, it has strong merits when seen through the lens of Islamic economics, a discipline rooted in ethics and morality. Let us begin with a simple conceptual explanation of blockchains.

At a basic level, the blockchain is a familiar concept. It is a ledger or a record. Similar to a written record (manual or digital), it has chapters or blocks of data and information.

 Further, each block (chapter) is added serially and consecutively over time. However, there are a few distinct features. First, the blockchain is a shared record. It is a distributed record. It exists to perfectly replicate any changes in a multitude of locations, in the servers of participants. 

Unlike records – manual or digital – that are centrally controlled and updated by a centralized authority, no single participant owns the blockchain or prescribes alterations in it. Any update in a blockchain requires a consensus amongst all participants or actors. Second, the blockchain is tamper-proof or immutable. 

It stores a history of itself back to the first entry. The identity of each new entry is created, in part, from the identity of the previous entry. Every individual block is thus linked to all that precedes it. Any unilateral attempt to change its content or identity (without a consensus of all actors) is not even a possibility.

 It is this feature of blockchain that makes it fully secure, transparent and a trust-inducing engine.

Do the above features of blockchain methodology (in bold) ring any bell with the economist?

The answer is, perhaps surprisingly, yes. Let us see, how.

Blockchain and Islam

Islamic economics has its foundations in the Quran and the Hadith – the primary sources of ethics and law – that govern the behavior of all actors. It governed the behavior of the companions of the Prophet (peace be upon him) of Islam in the first Islamic state of Madinah. It sets the rules of economic and social behavior for the believers and the faithful today and into the future. Let us begin with the past.

Subsequent to revelations through the Holy Prophet (PBUH) the Quran existed in a distributed manner with the companions of the Prophet, who played an important role in its compilation of the Quran. During the 23 years of prophethood, the verses of the Quran were memorized as they were revealed, and about 42 scribes wrote the verses on different materials such as paper, cloth, bone fragments, and leather.

Blockchain and the Quran: The Temper-Proof (immutable)Record

 Next in the process was to address the need for documenting every verse, or the recorded ledger that would shield the text from possible corruption – intentional or unintentional.

Setting up the Council: During the time of Caliph Abu Bakr, when 70 people who knew the Quran by heart (qurra), were killed in the Battle of Yamama, Umar ibn al-Khattab became concerned and appealed to Abu Bakr in order to compile the Quran into a book. Abu Bakr formed a Governing Council, or simply a delegation under the leadership of Zaid ibn Thabit, one of the leading scribes. 

This delegation of twelve companions assembled in Umar’s house and collected all the materials on which verses from the Quran were written. Validation and Consensus: The law of witness, as mentioned in Quran 2:282 played an essential role in the Qur’an’s compilation (as well as in hadith methodology), and constituted the very core of Caliph Abu Bakr’s instructions to Zaid. 

Ibn Hajar’s statement affirms this view, that “Zaid was unwilling to accept any written material for consideration unless two Companions bore witness that the man received his dictation from the Prophet himself.” (Al Bukhari: 4986). A total of 33,000 companions agreed that every letter of the Quran was in the right place. Then this mushaf (a record) was sent to Umar ibn al-Khattab.Sharing across the Network (Broadcasting the information): 

The reign of the second Caliph Umar was marked by the Qur’an’s rapid spread beyond the confines of the Arabian Peninsula. He dispatched companions to Basra and Kufa for the purpose of teaching the Quran. The third Caliph Othman continued efforts toward ensuring that the mushaf (record/ ledger) was now widely distributed by sending out full copies (full nodes) of the same throughout the many provinces of the expanding Islamic nation. 

His general injunction that people “write down the mushafs” ensured multiple replicas of the mushaf (a record) distributed as widely as possible. The outcome of this endeavor was that every Muslim province absorbed this mushaf (a record) into its bloodstream making it immutable and incorruptible.

Blockchain and Islamic Records

Sounds a lot like blockchain

Quran Inter-generational Distribution In addition to the distribution of the mushaf (a record) across geographical boundaries, the significance attached to the institution of Quran memorization (hifdh) ensured that Quran continued to be immutable across generations over the next fourteen centuries. Notwithstanding the multiple formats – text or digital – of the case of the Quran, the “distributed network” has expanded exponentially. In the face of any attempt by bad actors to corrupt a word or even a letter, the remaining actors with the entire Quran firmly etched in their memories, invalidate this change.

Note that the distributed ledger technology or a blockchain precisely seeks to ensure a similar outcome. If one bad actor intends to change a particular data or transaction, the remaining nodes invalidate this change. In order to be successful, a bad actor must make changes in all the nodes that hold this data, a task, next to impossible. 

Isnad: The Blockchain of Legitimacy for Prophet’s Words & Action

The second primary source of Islamic ethics and law shaping economic behavior in an Islamic economy is hadith or the reported words and actions of the Prophet (peace be upon him). The concept of isnad or chain of authorities attesting to the reported words and/or actions of the Prophet is central to the process of imparting legitimacy and historical authenticity to a particular hadith. The following quotes from some well-known Islamic scholars capture the significance of isnad. 

Imam Suffian ath-Thawri said, “The Isnad is the weapon of the Believer. So if he does not have a weapon with him, what will he fight with (against hearsays and false attributions)?” Imam Muslim narrates in his Muqaddimah, Abdullah Ibn al-Mubarak said, “The isnad is part of the deen (religion). If it were not for the isnad, then any person would have said (about Islam) whatever he wished.” Imam Muslim also reports Muhammad ibn Sirin (through his own chain), who states: “The science of chain of authority and narration of hadith is deen (religion) itself. 

You should check whom you are receiving your deen (religion) from.” The classification scheme of hadith in order of their authenticity is based on the reliability of the transmitter in the chain of narration, among other things.

To cite an example, the first among the types of hadith is Sahih (authentic) that fulfills the following five conditions: (i) The chain of narration is connected. (ii) The hadith does not oppose any other narration. (iii) The hadith is safe from defects. (iv) The narrators of the Hadith are reliable and just narrators. (v) The narrator’s memory is on point – have a complete memory. What does it mean that a chain is connected? It means that:

  • the narrator has heard it from the narrator he is ascribing the narration too.
  • the narrator read this narration to the narrator from whom he is taking the narration.
  • If the person has heard the narration from the scholar, then he is allowed to use either of the two modes of narration: He narrated to us or I heard.

The science of hadith as the primary influencer of Islamic economic behavior is essentially about inquiry into the authenticity of hadith through isnad or chain of narration.

Note the role that the “chain” played in historically shaping the contours of Islamic economics, by creating the authenticated, immutable and tamper-proof records of the words of God and the words and actions of His Prophet as the basis of Islamic economic behavior.

Also Read: Should Cryptocurrency Be Shariah Screened?

Fast Forward 2020: Contracting in a World of Deceit (Gharar)

Do blockchains have a role to play in Islamic economics in contemporary times?

In addition to riba-prohibition, a norm central to Islamic economic and financial transactions is the prohibition of excessive gharar. All forms of contracts and transactions must be free from excessive gharar (or uncertainty). The Islamic scholars in two ways have broadly defined the concept of gharar.

 First, gharar implies uncertainty. Second, it implies deceit. The Quran has clearly forbidden all business transactions, which cause injustice in any form to any of the parties. It may be in the form of hazard or peril leading to uncertainty in any business, or deceit or fraud, or undue advantage. Gharar induces trust-deficit and conditions of conflict.

While we live in a world where fakes and frauds dominate, the digital world has its own additional uncertainties and vulnerabilities that most of us do not understand. We have learned to place our trust in a few giant actors – mega entities as our trust-anchors.

Most of our online transactions and value transfers across the globe take place through their facilitation and through their channels. However, this trust can be easily broken in the face of data breaches, cyber-attacks and rampant use of data mining to influence customers and monetization of information. 

This is a clear possibility with centralized databases with these trust-anchors. This is the rationale behind the emergence of blockchains, which disallows such a possibility. The transparency, verifiability, traceability, immutability that go with blockchains can be seen as gharar-reducing and therefore, leading to economic behavior that is in conformity with Islamic ethics and morality. 

Blockchains are here to play a significant role in the Islamic economy as its thought leaders seek to come to grips with the new forms of risks, uncertainties, deceit, fraud, and vulnerabilities in a digital environment.

This article is co-authored by Dr Mohammed Obaidullah and Mohammed Naqiub and first appeared in ibfnet.blog

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