The Convergence of Blockchain Technology and Islamic Economics: Decentralized Solutions for Shariah-Compliant Finance

TL;DR

Problem addressed: reconciling modern monetary dynamics with Shariah-compliant finance. Approach: conceptual analysis of how blockchain can operationalize Musharakah and Mudarabah through tokenization and smart contracts, illustrated with Bitcoin's capped supply ($N=21{,}000{,}000$) and scarcity metric $S = (N - M)/M$. Contributions: a framework showing tokenized partnerships, automatic profit-and-loss sharing, and governance-enabled decision-making, reducing information asymmetry and reliance on interest-based instruments. Significance: enables inclusive, ethical, scalable finance aligned with Maqasid al-Shariah, with potential to reshape global financial systems.

Abstract

This paper provides a brief overview of the ongoing financial revolution, which extends beyond the emergence of cryptocurrencies as a digital medium of exchange. At its core, this revolution is driven by a paradigm shift rooted in the technological advancements of blockchain and the foundational principles of Islamic economics. Together, these elements offer a transformative framework that challenges traditional financial systems, emphasizing transparency, equity, and decentralized governance. The paper highlights the implications of this shift and its potential to reshape the global economic landscape.