Ethereum is a blockchain technology that allows code to run on it called smart contracts. Its base currency is $ETH. You can think of the ethereum blockchain as a super computer that you can run things on. The power this super computer runs on comes from the miners. For programs to run, $ETH is paid. This is to help prioritize the programs for which the miners process. In return for running the programs -or rather, providing the processing power-, the miners get paid.

Until recently, ethereum has been using a Proof of Work alogorithm. Basically, with Bitcoin and ethereum as examples, a miner's computer is given a puzzle they have to solve. The first one who solves the puzzle gets paid.

Recently, ethreum is starting a move into Proof of Stake. Where, instead of miners putting money into electricity and whatever needed to mine ethereum, they want to virtualize the whole process.

Basically they replace miners with what they call "validators". Validators send $ETH to a special address and this "proves their stake". A program then uses this to figure out which validator gets to make the next block. A block is just a bunch of transactions. In return, the Validator gets a percentage of the "stake" they put in back for the blocks they make.

Source 1: https://github.com/ethereum/wiki/wiki/Proof-of-Stake-FAQ

Source 2: https://www.coindesk.com/ethereums-big-switch-the-new-roadmap-to-proof-of-stake/

Source 3: https://medium.com/@VitalikButerin/a-proof-of-stake-design-philosophy-506585978d51

Source 5: https://ethereum.stackexchange.com/questions/102/how-does-the-casper-proof-of-stake-algorithm-work

Source 6: https://www.reddit.com/r/ethtrader/comments/7ghxe9/can_someone_eli5_proof_of_stake/

Some have described this as betting, while others have described it as similar to shareholder voting and whatnot. Essentially, the "stakes" put in are lost if the validators do not follow the rules and instead act malicious.

I do have a few questions on this. Can all of this truly be considered betting / gambling?

If so, then this would only affect the miners / validators making their income haram? Or would this affect etehreum, its usage as a currency, and building programs/smart contracts on it -i.e utilizing it as a technology-, and make all of that haram as well?

Simply put, if it is gambling, then only participating as a validator would be haram. Seeing that not everyone follows Islam, there would be the Kuffar that still participate. Would that also make utilizing all other -arguably good- aspects of ethereum Haram for us as well?

I would appreciate someone with both technical knwoledge and knoweldge of the shariah to answer. And if found as gambling, to perhaps expand on my other questions.


1 Answer 1


This article makes me almost think it is like an investment: https://blockonomi.com/ethereum-casper/

Gambling is defined as risking money where you either benefit or not, though, it is also further defined as those cases where you do not work and are simply throwing money into uncertainty and hoping for something in return.

This form of Proof of Stake is not, as far as I can see like how it is implemented elsewhere. Where your money sits in the wallet and somehow generates more of itself based on age or something.

Rather, you, along with others, seem to be putting money into a specialized program that locks it up and then receive dividends. The only way you could lose money is if you try to act against the rules -like make a hard fork or something.

I do not know, though. Because of the wording and the mentioning of multiple people putting their money, it really does sound like gambling. What do you guys think?

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