🟒Buy from the Cryptocurrency Exchange

Cryptocurrencies Exchange is a digital exchange that helps users exchange cryptocurrencies. Some exchanges also allow users to trade fiat currencies for cryptocurrencies. The exchange is divided into 2 types:

  • Centralized Exchange (CEX) : an exchange that operates in a centralized manner and requires full custody of users’ funds. Users of these exchanges do not have full control over their assets, and put their assets at risk if an exchange is hacked or is unable to repay debts. Examples of CEX: Binance and Coinbase

  • Decentralized Exchange (DEX) : an exchange that allows users to exchange cryptocurrencies without the need for an intermediary (i.e centralized exchange) and without giving up custody of their coins. Anyone can participate in providing liquidity so they will get a dividend from transaction fees and native token incentives from the DEX. Examples of DEX : Uniswap, Pancakeswap, Sushiswap, Spookyswap, Trader Joe, etc

Slightly different from regular purchases on cryptocurrency exchanges, there is a token purchase scheme as form of fundraising for new web3 project. This is referred as initial coin offering (ICO), or if the offer is hosted by DEX it is referred as initial DEX offering (IDO).

Sharia Perspectives:

Buying and selling through exchanges either CEX or DEX is permissible as long as it is a spot transaction. While futures, options, or other derivatives are not permissible due to usury / interest fee involvement and regarding compliance of object possession status at the time of the sale. Participating in ICO or IDO is permissible as well, as long as the coins or the tokens are halal from their substance aspect.

Reading References

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