Barakah Finance Solution - Overview

Barakah Finance Solution - Overview

The current structure and application of DeFi and digital products do not comply with Shari'ah principles. This is largely due to the Islamic understanding that money, digital or otherwise, cannot be treated as a commodity. It is a representation of value, and can be used to trade and exchange that notion of value. However money, in and of itself, cannot be used to create more money by merely depositing it/lending it/staking it. The vast majority of DeFi services are premised on this riba (interest) based notion, and as such, staking rewards are configured and distributed on these terms.

A Shari'ah compliant manner of distributing rewards for staking would, for example, require the endeavour to be based on a mutual sharing of risk and reward on the part of participants of the entire ecosystem. This notion of risk and reward can be built into a staking reward in one of two ways:

1. An onchain example would be receiving staking rewards for contributing to the overall network security of a particular blockchain (or layer 2) solution. An example would be receiving ONE tokens for staking Harmony ONE tokens. The reward is compensation for securing the network, and the risk is of being slashed for being a potential dishonest node within the network.

2. A hybrid on/offchain example would be receiving staking rewards for contributing to the overall network security of a particular token ecosystem (such as the BRKH token). The example in this case would be receiving a reward of BRKH tokens for staking Barakah tokens based on the performance of extrinsic offchain metrics (such as the % increase in Twitter followers in a given period of time). The risk would be twofold: a) the user runs the risk of receiving no rewards if the minimum twitter growth metric has not been met) and b) the risk of receiving a penalty fee for withdrawing staked Barakah tokens within the staking period.

Barakah Finance will focus on creating an ecosystem of Shari'ah compliant products and services that use both entirely onchain as well as hybrid on/offchain solutions.