1️⃣Halalanft NFT
1. What are NFTs (Non-Fungible Tokens)
One of the most important aspects to note when learning about NFTs is the basic concept of non-fungibility that underlies their design. One must learn about the difference between fungibility and non-fungibility to understand how NFTs are unique as assets.
The basic concepts surrounding NFTs ultimately garner the distinction between fungible and non-fungible assets.
Fungible Assets
A simple definition of a fungible asset is if each unit of that asset can be easily exchanged for one another. One cannot distinguish one unit from another in a fungible asset. And in fact each unit of a fungible asset has similar value and market validity. For example, one ten-dollar bill will be the same as another ten-dollar bill in terms of value and validity.
We can find other examples of fungible assets in precious metals, commodities, cryptocurrencies, fiat currencies, and bonds. When transactions occur between units of an asset with similar value and functionality, we can have a commensurate exchange of fungible assets. For example, we can exchange a ten-dollar bill for ten one-dollar bills. In this case, dollar units are involved in the exchange, and ten one-dollar bills are equal in value to a ten-dollar bill. Moreover, each of the ten one-dollar bills will have the same validity as a single ten-dollar bill. So, one can clearly see how the US dollar functions as a fungible asset, with paper money providing a representation for the underlying value.
Are cryptocurrencies fungible? We will most likely come across this question when discussing the basics of NFTs. In general, many cryptocurrencies are essentially fungible assets. For example, we can consider Bitcoin as a fungible asset because one unit of BTC is equal to another unit. Each unit of BTC will have the same function and quantity. The order of mining BTC tokens does not affect the value of BTC units, and they are on the same blockchain. However, if anyone creates blockchain branches (forks) to create a new type of coin, it will not be similar to Bitcoin.
Non-Fungibility
With a detailed understanding of fungible tokens, one can easily ascertain that non-fungible tokens will be the opposite of the same. Non-fungible assets are not interchangeable with each other and have unique properties that separate them from each other. While NFTs look similar in some aspects, there are many stark differences between them.
Some notable examples of non-fungible goods in the real world include show tickets and artwork. Even if two show tickets have the same design, a front row ticket will have more value than a back row ticket. Similarly, two paintings may look similar, albeit with certain rare elements that set them apart.
2. NFT in the view of Islamic fiqh
The concept of fungibles and non-fungibles has been addressed at length by the Islamic jurists and schools of Islamic law. In summary, fungibles are called Mithliyyat in Fiqh, whilst non-fungibles are called Qimiyyat.
A non-fungible (Qimiy) is a property or asset that does not have an identical or near-identical asset to it in its form (surah). Examples of this include animals of the same genus, unique items such as a dress designed and made for one person, or a painting or calligraphy that is unique. Qimiy has also been translated as heterogeneous property.
If a person’s fungible item is destroyed by a third party, the first remedy is a like-for-like replacement, because a near-identical item is in existence. In contrast, if a non-fungible item is destroyed by a third party, only the item's market value is paid as damage because a replacement that is identical is impractical.
3. The Principle of Halal NFT
When reviewing NFTs, Islamic scholars will generally consider the following principles:
Maliyyah – something which reasonable people have an inclination towards and can be retrieved when needed.
Taqawwum – something which has a lawful utility and benefit.
Manfa’ah Maqsudah – In the discussion of services, the jurists stipulate that the utility of something must be such that it is sensible and commonly sought after by people. It must not be something that Sharia prohibits, or reasonable people will not seek such utility.
Extravagance (Israf) and wastefulness (Tabdhir).
Any potential wider Sharia infringements.
The impact of investing in such assets, and how it impacts the remaining wealth of a person to fulfil their Islamic duties and obligations in particular to maintain themselves and their families.
NFT art & collectibles should be:
Not something that is forbidden to be seen or should be covered in public such as intimate parts of the body.
There is nothing sacred in Sharia which it is prohibited to portray, such as Allah, the Prophets, etc.
Not mocking or disfiguring others
Represent something lawful and halal.
Not be meaningless and merely entertaining
Have a genuine utility which is of worldly benefit or spiritual benefit.
Not a living creature that is forbidden to be portrayed.
There are two kinds of portraying non-living things:
Portraying things that are made by humans, for example, cars, masjids, boats, and so on, is allowed without dispute. Since it is permissible for humans to make them, so they are allowed to draw them as well.
Portraying of non-human-made objects, such as mountains, rivers, or the sea, is permitted by scholars. However, There are differing opinions, and one of the weak opinions suggests that the depiction of trees or plants is disliked (makruh). There are other opinions which state that the image of a tree is haram and that the image of the sun and moon is haram, but these are two weak opinions too, since the prohibition in the hadith is for the image of a living creature.
We realize that there are differences in the law between portraying and getting the benefit of pictures. However, detailed information about image law will not be covered in this whitepaper.
God willing (Insha Allah), the details, particularly about halal web3, will be elaborated in the community soon.
4. How to get NFTs?
Usually an NFT collection has the same character theme but with different traits (either group traits or sub-traits). When someone wants to buy an NFT for the first time, there are usually 2 ways to do it, and this depends on the artist, developer, or owner of the NFT project:
Buy from the NFT market. One can buy NFTs that one sees and likes on the marketplace because the character themes and traits are already revealed and known. So from a Sharia perspective, buying and selling NFTs on the marketplace is permissible as long as the content of the NFT image or the main use case of the NFT being traded is also halal.
Buy an NFT by minting (creating) from a developer site or a decentralized application (DApp). Here, the buyer cannot be sure which image will be obtained. Thus, it can be said that there is gharar (uncertainty) or jahalah. However, this gharar can be minor and tolerable if the difference is only in the traits and has no effect on the minting price (all NFTs have the same minting price)."
Scholars agree that minor gharar does not affect the validity of a contract. [Ahkamul Qur'an Al-Jashshas 2/189, Al-Masalik fi Sharh Muwattha' Malik Ibnul Arabi 6/83, Al-Majmu' Imam Nawawi 9/285, Hasyiah Raudh Murbi' Ibn Qasim 4/351]
Thus, as long as there is an object being sold, the object is known (i.e. digital art), the theme of the character is known, the buyer can specify the number of items desired, the NFT being sold can be delivered, and the nominal price is known, then this printing transaction is valid & permissible from a Sharia perspective. And it can be an invalid transaction if any of the above information is not met.
To mitigate major gharar from a Shariah perspective, an NFT project can implement a minting model with varying prices for common and rare NFTs while maintaining the same price within each rarity level. Wallahu a'lam
5. Halalanft NFTs
Halalanft are a collection of NFTs in the form of vegetation/plant figures with several attributes, including the Hijaiyah letters on their bodies: Ha, Lam, or Alif (which can be assembled into Halala, meaning permissible in Islamic law).
Halalanft will be minted on the Avalanche and ZKSync Era blockchains with a total supply of 3,000 NFTs. Here is an example of a Halalanft NFT and its traits:
With the brief literature review and the example sketch above, The NFT collection from Halalanft is deemed halal based on the following perspectives:
The basic character of the NFT collection from Halalanft is plants/vegetation. It does not fall under the category of living beings that are prohibited from drawing such as humans, animals, etc.
Characteristics such as the presence of hands, feet, eyes, mouth, body, back/wings, and other features do not necessarily make the drawing of plants/vegetation impermissible. Halalanft NFTs are basically vegetation/plant figures which cannot be compared to living humans because they do not have noses, ears, and other organs that living humans have. Imam Ibn Qudamah opined:
"If the image is removed from the part that the creature cannot live without, such as the chest or abdomen, or the head is separated from the body, then it does not come under the prohibition. This is because the image becomes lifeless after those parts are removed.
For example, if the head is removed. But if the parts removed from the creature are still viable afterwards, such as if the eyes and legs are removed, then it is still a forbidden image. And if initially the image is just a body without a head, or a head without a body, or there is a head but the rest of the body is not an image of a living being, then it is not a forbidden image because it is not an image of a living being." (Al-Mughni, Ibn Qudamah, 10/201)
The NFT collection from Halalanft has a clear use case and utility for this world and the hereafter (details can be found in the "what makes us different" section). In fact, through purchasing/owning NFTs and using the autocompounder (yield optimizer) service, the user is contributing directly to the act of philanthropy.
Wallahu a'lam.
In summary, the compliance checklist from Halalanft is as follows:
Wallahu a’lam
Reading Reference :
Al-Mughni, Ibnu Qudamah
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