Decentralization of Islamic Finance

CAIZ MEDIUM
3 min readMay 27, 2021

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In the world of greed, lack of trust, and selfishness, Islamic finance is a boon for every investor. This concept of finance that came into existence several centuries ago is an approach that conforms the Islamic principles or Sharia laws. Around the 20th century, formal Islamic finance was established which abided by the five principles of Islam and zakat is the most common principle. Currently, Islamic financial institutions are worth $2 trillion.

This system of finance is not even closely related to any kind of greed, injustice, gambling, or hefty interests making it pious and holy in the eyes of Islamic law. The center of this investment is to put forward an unbiased banking scenario and paying or charging interest is considered haram or illicit. Even though it is an unbiased and pious form of investment, yet it has been centrally governed in many financial institutions.

Now, what if we say that you can simply put a full stop to the mechanism of centralized finance, and choose a form of flexible finance which makes you the governor of your transactions while complying with the Sharia laws? Stick to this blog till the end for more information on this exciting topic!

Decentralized finance

Decentralized finance or Defi, unlike centralization, is the modern way of finance based on blockchain technology. There is no use of middlemen or brokerage systems which makes it trustworthy and free from fraudulent activities. This technique automates the financial instruments and makes the transaction faster and efficient.

Since it is based on a distributed ledger or a chain of blocks, every transaction is secure with the help of the concept of cryptography. Now, let us talk about its raging popularity in this era. We live in a digitally advanced age, where the banking sector is coming up with modern computerized techniques. However, one thing that remained constant was the same centralized and governing system of transaction and investment.

Defi system shattered the monopoly of centralized finance and freedom of transaction marked its growth. Therefore, this system of self-governed finance digitally was introduced by the concept of virtual currency known as a cryptocurrency or a digital currency that can be bought with fiat currency.

How is Islamic finance connected with decentralized finance?

What is better than having an organized and ungoverned Islamic financial system? By now you’re well aware of the conception of decentralized finance and how its transactions are secure and recorded with a ledger called the blockchain. You might know about some virtual currencies being introduced in recent years that work on Defi system of finance. However, these currencies are not based on Islamic principles.

Why is the Islamic way of decentralization important? Well, having an Islamic blockchain enhances the money transfer and protects it with end-to-end encryption. There is no room for fraudulent activities because it is working on Islamic laws. In a decentralized system, an extra fee of money transfer across the globe is null, while some applications charge a fee. This is how decentralization of Islamic finance stands apart from the rest by prohibiting the charge of an additional sum.

Which cryptocurrency is based on the principles of Islam?

The concept of Caizcoin was born in early 2018 with the main idea to introduce a system that follows the laws of Islam- fairness, transparency, harmony, and freedom. The main prohibitions include charging interest, investing in business involved in illicit activities, speculation or maisir, and uncertainty. This is where the coin has marked a transparent and safe medium of transactions along with financial freedom for everyone.

Caizcoin allows everybody, Muslims and non-Muslims, to relish the hassle-free, secure and easy withdrawal of funds that complies with the sacred laws of Islamic finance. Therefore, it offers an environment that provides a financial solution to every small and big investor.

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CAIZ MEDIUM

CAIZ: Uniting tradition with fintech for ethical, secure & fiqh-compliant financial freedom.