The Pros And Cons Of Bitcoin

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In the recent times, the world has seen a wave of innovation in the field of financial technology (known as fintech), especially after the widespread adoption of cryptocurrencies that have taken over the world of finance by storm. Cryptocurrencies are secure, decentralized and anonymous digital money that emerged as a side product of another invention called ‘Electronic Cash System’ by an unknown man ‘Satoshi Nakamoto’ in 2009. This invention got appropriated as a cryptocurrency called the ‘Bitcoin’, the most prominent one in use today. The Middle East being a diverse market and melting pot of young entrepreneurs has become one of the key areas for Bitcoin to thrive in, with a lot of people investing in it specifically in UAE, Saudi Arabia,…show more content…
The most important characteristic of Bitcoin that complies with the principles of Islamic banking is that it conforms with the prohibition of riba (usury), unlike the riba-backed central bank fiat currency. Another key element of its compliance to Islam is its incorporation of the principles of maslaha (social benefits of positive externalities) and mutual risk-sharing (as opposed to risk-shifting) on which most of the cryptocurrencies are based on. Moreover, Bitcoin complements fiat currency rather than replacing it. This enables people to get the best of both worlds depending on their needs. Also, because of its diversified currency portfolio, Bitcoin has the potential to be used as an investment tool especially in places like Zimbabwe and Venezuela where people are already preferring to trade in commodity currency like precious metals as the fiat currency is losing its value. Like all the currencies, Bitcoin comes with its risks that make people doubt its Islamic compliance. Firstly, Bitcoin used to be highly volatile, especially in 2013 when its started at $13, went as high as $1150, then crashed to $520 in the span of a few short months (3). This volatility has made some scholars label Bitcoin as Gharar, which denotes something that is unknown, uncertain, risk-taking and is generally prohibited in Islam. Secondly, Bitcoin is susceptible to cyber-crimes and scammers. Furthermore, as its transactions are irreversible, the users cannot feud and recover the money lost. In addition to this, the decentralized and stateless nature of the system makes it harder to address fraud cases. In fact, in its initial stages, Bitcoin was regarded as the criminal’s currency due to its extensive use for cybercrime activity, a perspective which has gradually changed as organizations and people have started to embrace it. As Bitcoin still remains in its early years, there has been a

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