What is Cryptocurrency?
Cryptocurrency is a fully digital currency that can be used just like normal currency. Cryptocurrency is converted to real currency for buying and selling, different types of cryptocurrencies can also be interconverted. Cryptocurrency is operated using a technology known as the blockchain.
Some of the most popular cryptocurrencies include Bitcoin and Ethereum. The massive boom in the crypto market is fairly recent. Up until the mid-2010s, people would exchange thousands of units of crypto for trivial transactions such as fast-food takeouts, however now each one of those units is worth thousands of dollars in most cases.
Why are people buying into crypto?
The reason for the incredibly insane demand for cryptocurrency comes from people having faith in its use in the future. The world is moving towards digitization, thus anything that digitizes day-to-day tasks is considered a viable option for the future.
Another reason is the high level of encryption and safety. People consider it to be a good investment of their money with a chance of returning a good profit. It is also incredibly safe to invest in reliable cryptocurrencies thereby increasing its appeal to people.
Cryptocurrency in Islam:
When a fairly new phenomenon such as cryptocurrency enters the scene, a debate is sparked within the Islamic world and consequently Muslims. Some scholars initially argued that these currencies depict a gambling model. However, after careful analysis by some of the most knowledgable Muslim scholars, decisions are made in the light of the principles defined in the Quran and Hadith.
Cryptocurrency, according to a majority of Islamic scholars, is permissible for use in Islam. This is mainly because it follows a natural demand and supply relation like any other currency in the world and it doesn’t include a heavy involvement of interest.
Since the above matter was always a little disputed, it only made sense to come up with a new cryptocurrency that is Islam compliant. Such cryptocurrencies are called Islam Compliant cryptocurrencies. This led to the first-ever Islamic cryptocurrency called Caizcoin. This was followed by a release of many more cryptocurrencies, which too were Islam Compliant.
How Islamic Cryptocurrencies work
Islamic cryptocurrency works similarly to any other cryptocurrency. They use blockchain technology to ensure high-level security and encryption. In the blockchain system, data is recorded in the form of “ledgers” and is then distributed to “miners”. A miner is a computer that is connected to the blockchain network. When a transaction is made, it is verified by these miners. This makes fraud and theft in cryptocurrency almost impossible, as hacking millions of computers is far from possible in itself.
Islamic and other cryptocurrencies are decentralized. This means that there is no governing body that has the capability of manipulating the market through external factors. Furthermore, Islam Compliant cryptocurrencies do not endorse interest. The combination of these factors has greatly impacted the success of Islamic cryptocurrencies among Muslims.
Should you invest in an Islamic cryptocurrency?
The answer to the above question is not very simple. It is dependent upon a wide array of factors for each individual. Below are some of the pros and cons of investing in Islamic Cryptocurrency to help you make an informed decision.
Check your finances:
It is highly discouraged to invest a huge proportion of your finances into any type of cryptocurrency. The market for these currencies is very volatile and some unforeseen factors can often greatly affect prices.
While these fluctuations can be in your favor, they can also be against you. If you are willing to risk a particular sum of money, then you should invest, as the possibility of an unnatural boom or decline is highly unlikely.
An incredibly essential law in Islam, often forgotten by many, is the fact that interest is prohibited. With Islam Compliant cryptocurrencies, you can eliminate this concern.
Since these currencies are free of dealings involving interest, they will attract millions of Muslims toward investing. It is basic demand and supply, that when more buyers enter the market the price is automatically driven up. Thus, it can be an incredibly profitable investment to make as more and more buyers enter the market.
Easy to buy and sell:
Since cryptocurrencies are digital, it is very simple to buy and sell them. Tracking their progress is also very easy and everything is at your fingertips. It is also easy to make transactions online with cryptocurrency. All of this is done while maintaining security and encryption.
Although it may be very easy to make transactions, before investing in a cryptocurrency there are a few steps you need to take. If the cryptocurrency you are buying is hardly acceptable, it is a bad investment.
Such a currency could have a hundred benefits to it, but not being accepted as a means of payment is enough to neglect every other positive. Thus, it is key you make sure that your investment is into a cryptocurrency that is widely accepted as without this there is little to no margin for growth too.
Perhaps the biggest advantage of cryptocurrency is its universality. In terms of real money, a currency conversion may be a hassle. With cryptocurrency, making a payment to someone on the opposite end of the globe is as easy as making a payment at your local grocery store. This is a particularly attractive feature for people who regularly need to make payments in other parts of the world such as entrepreneurs and travelers.
The above discussion highlights the perks of investing in cryptocurrency. However, not everything that glitters is gold. There are some challenges and for beginners, it may lead to trouble. Make sure you research your decision well and invest in Islamic cryptocurrency only if you see fit. Make sure to extend your research to the depths of the specific cryptocurrency you are interested in purchasing, either as an investment or for usage.
Frequently Asked Questions (FAQ):
While there may be some debate, largely cryptocurrency is permissible. In the case it is not, Islamic cryptocurrency serves as a brilliant alternative.
Islamic cryptocurrency has a zero interest rate and is Islam compliant.
Yes, like any other cryptocurrency, you can use Islamic cryptocurrency to send and receive payments.