Mufti Asad Gul
The word blockchain is composed of two words: block and chain. Blockchain is called blockchain because data is stored in blocks and connected in a chain. Blockchain is a list of records called blocks that are linked using cryptographic means. At a very high level, blockchain is software; software is merely a set of instructions, data, or programs used to operate computers and execute specific tasks. All the intangible elements on a computer are generally regarded as software.
Common examples include applications, scripts, and programs. Hardware, on the other hand, refers to the tangible elements of computers. Since blockchain is software, it only exists as intangible records and strings of code. It is very unlikely that an average person will see the underlying infrastructure of a blockchain or the mechanical operations.
At most, they will experience a blockchain-based service rather than see a blockchain. An analogy for this is a word processor; most people do not know what is happening mechanically in the backend whilst an article is being written, yet they benefit from using the word processor. Not all people need to understand exactly what’s underneath, they just need to understand what they can do with it.
Since blockchain is software, it is simply a programming code that translates into a usable interface when it is downloaded onto a computer. Different companies can build apps in virtual layers on top of this code to make the information more accessible and useful to the people who access it. In essence, it is an online ledger. A ledger is a system to record and store information – as such, books, and documents have been traditionally referred to as ledgers.
Many types of data can be stored on the ledgers, such as identification data, various statuses such as employment, Memberships and subscriptions, criminal records, Economic data, Ownership evidences, Cash balance owned by someone, assets and liabilities, Profit and loss statements.
Although we have defined blockchain as a software that essentially provides ledger services, blockchain is not cryptocurrency. Rather, it is the digital ledger that underlies the operations of cryptocurrencies and allows for their existence by recording and storing their data. The information of who owns, transfers, and sells a digital asset is all stored on a blockchain.
Considering the above, blockchain is really a new type of technology which features a sequence of blocks or records chained together and distributed among its users.
It facilitates an immutable record of transactions that do not need an external governing authority to validate the authenticity and integrity of the data. Although financial transactions are the most common type of data stored and transferred on blockchains at present, any type of information and data can be recorded on the blockchain. Blockchain can be summarised as “an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value.” Technology is neutral, from a Sharia perspective, as it is only an enabler. Adopting new software or technology is lawful and permissible; the default state is of permissibility in such matters.
Software can be designed in various ways to deliver various services. Hence, the objective and function of a blockchain must be considered when reviewing a particular type of blockchain. Blockchain can be likened to a knife; it can be used in permissible and impermissible ways.
A knife can be used for a virtuous action such as cutting fruits to serve one’s guests, or it can be used for heinous crimes like murder.
The knife is, of course, not to blame, but the user and the way they use this tool. Similarly, blockchain is technology. It can be deployed in rewarding and permissible avenues, or it can be used to record data of impermissible activities. When considering Blockchain from a Sharia perspective, a Ju’alah structure is the most reasonable.
Ju’alah is a contract in which one of the parties (the Ja’il) offers specified compensation (the Ju’l) to anyone (the ‘Amil) who will achieve a determined result in a known or unknown period.
Ju’alah’s permissibility is based on a known output, whilst the input is uncertain. It is not affected by the uncertainty that prevails with respect to the subject matter of the contract – that is, the work to be done.
It is for this reason that Ju’alah is suitable for activities for which Ijarah (leasing) is not. The person responsible to deliver the work and the time of delivery of the work should all be quantified in Ijarah.
Furthermore, a Ju’alah does not need to be contracted with any specific individual. A Ju’alah contract can be concluded by an offer directed towards a specified worker or towards the general public. As such, in a blockchain network, the offer is addressed to all the nodes in the network. The subject matter of the contract is the work that is agreed upon through Ju’alah, as well as the compensation for the work.
