Yield farming is a concept that has gained great popularity in recent years in the DeFi world. It’s an investment strategy with which token holders seek to obtain excellent returns for their money, investing and participating in different DeFi platforms, always with the intention of finding any financial advantage that allows them to maximize profits.

Without a doubt, this is a form of investing that can generate excellent returns if done correctly and has quickly gained a lot of momentum for its application on many platforms within the crypto ecosystem.

But what are the 4 types of yield farming and is yield farming halal?

Generally speaking, the 4 types of yield farming are as follows: 1) Liquidity Pools, 2) Lending and Borrowing, 3) Staking (proof of stake), and 4) Holding for a Redistribution Fee. As for if yield farming is halal, not all types of yield farming would be considered halal. It depends on the type of yield farming you participate in.

Let’s take a closer look at each of the 4 types of yield farming and let’s see which type of yield farming would be considered halal and if any of the 4 types of yield farming would be considered haram.

What is yield farming?

Yield farming is a formula by which investors try to obtain profits from the storage of cryptocurrencies. With this investment method we have two key factors to consider:

1. Liquidity provider (LP) – A user who brings cryptocurrencies to the market
2. Liquidity reserve (LR) – A smart contract that validates and manages the funds provided by the LP

Basically, in yield farming, LPs obtain rewards in exchange for providing liquidity through their funds, something similar to the interest paid by banks to those who keep money in them for a certain period of time. But one main difference is that in Islam, it is haram to collect bank interest since it is derived from usury, but with yield farming, some types of yield farming are halal. We’ll touch on this more later in this blog post.

How does yield farming work?

In a yield farming system, investors transfer or deposit assets into a smart contract providing liquidity. In exchange for this, the system will offer them a benefit for the immobilization of these assets.

This can be done through specialized platforms that facilitate the whole process, usually on Ethereum ERC-20 tokens, but since there is no single model or a single system to apply this formula, each platform usually applies its own rules, which can be modified from time to time.

What are the 4 types of yield farming?

Here is a list of the main methods of yield farming that you can find in the market. Of course, it is also possible to find some variations of these methods, but in general, they’re as follows:

1. Liquidity pools

A liquidity pool is perhaps the most common form of yield farming. As I already explained, this works with a smart contract that blocks tokens to ensure liquidity on a decentralized exchange platform. The users who provide these tokens are called liquidity providers.

The liquidity pool will hold two tokens in a smart contract to form a trading pair. Suppose there are tokens “A” and tokens “B”. Suppose also that the price of A can be equal to 100 B.

LPs must contribute the same value of A and B to the pool so that someone who deposits an A token will also have to add 100 B to the same contract. So when someone wants to exchange A for B, they can do it based on the funds deposited in the contract, instead of waiting for another user to appear who wants to do the opposite operation – as happens in crypto exchanges.

LPs are then incentivized for their contribution with different types of rewards, which usually are native tokens of the platform that provides the service.

What are the risks of liquidity pools?

Although this activity can be very profitable, it’s important to be aware of the risk of impermanent loss (IL). This means temporary losses of funds due to the high volatility of the trading pair; the higher the volatility, the higher the IL risk.

In this case, the losses are for less money at the time of withdrawal, which means that a liquidity provider can end up with a greater amount of the B token and slightly less of the A token or vice versa. However, IL can be compensated by trade commissions and other additional rewards earned by LPs.

2. Lending and borrowing

The idea behind a lending and borrowing mechanism is very simple: lenders provide funds to borrowers in exchange for a regular interest rate.

In the crypto world, lending and borrowing are carried out through different types of platforms that can be centralized or decentralized.

If we take this to the world of DeFi, both providers and borrowers interact in fully decentralized platforms in which they have total control over their money, thanks to the use of smart contracts that operate mainly on the Ethereum network.

The way this works is very simple: user X sends a certain amount of funds to a lending platform using a smart contract, which will then provide them with earnings in the form of interest, usually in the platform’s native token.

Such a smart contract then becomes a kind of intermediary available to other users of the platform who want to apply for a loan – the money contained in the smart contract. Subsequently, lenders can withdraw their earnings from the platform from time to time in the form of interest in native tokens.

As a general rule, for a user to be able to request a loan in native tokens, he must previously deposit in the form of a guarantee, an amount in another cryptocurrency, equal to or greater than the amount of the loan that he’s going to request.

What are the risks of lending and borrowing?

Although this financial activity is usually quite safe in the DeFi context, there are also a couple of aspects that need to be considered.

First, there is always the possibility that the smart contract used for the operation receives some type of manipulation. This is more likely in the cases of smart contracts provided by third parties.

On the other hand, borrowing APYs on some cryptocurrencies could suddenly go up for some reason, which could lead to the most careless users ending up paying more than expected.

3. Staking (proof of stake)

Staking within the universe of cryptocurrencies involves keeping a certain amount of funds in a wallet in order to obtain yield for keeping this crypto locked up or “staked” on a blockchain.

This action of holding funds in a crypto wallet, also known as staking, serves to support the security and operations of a blockchain network by validating transactions on the network. In return, they are able to generate yield, or rather, earn cryptocurrency, for providing such a service to the network.

This consensus system is known as Proof of Stake (PoS) and is based on the fact that to obtain consensus, users must demonstrate possession of the indicated funds.

The idea is that users block cryptos and from time to time, the network randomly assigns the right to one of them to validate the next block, the probability of being chosen is directly proportional to the amount of frozen funds held on the network.

In this system and unlike what happens in other consensus mechanisms – such as PoW in Bitcoin – the users who act as validators, don’t compete with each other using the computing power of their equipment, but instead, put up a share of assets to certify that they’ll validate transactions in an honest way.

What are the risks of staking?

In the case of staking, you have to consider the risk of keeping a high amount of funds locked on a blockchain for a long period of time. Remember that there can always be attacks on these platforms that end in the partial or total loss of the funds held, something that has already happened on many occasions.

In addition, in some cases, these funds are placed in the hands of third parties, which implies a risk if there is an internal theft attempt on the platform.

4. Holding for a redistribution fee

Some decentralized exchanges facilitate the buying and selling of different crypto assets between users, but they do so through a model called automated market making (AMM).

Users can add their inactive tokens to the liquidity pools available on the platform and earn passive income according to their contribution and at the same time, other members can exchange tokens from these liquidity pools – the profits go to the community of users.

In the case of SushiSwap for example, anyone can provide liquidity through its internal app. When they do, they’ll receive SLP tokens (SushiSwap Liquidity Provider tokens). For example, for a $SUSHI and $ETH pair, the user would receive SUSHI-ETH SLP tokens.

Any user can create a new liquidity pool simply by providing a new pair, and it’ll be the proportion of tokens that the user adds, which will set the price of this new liquidity pool.

Afterward, other users can trade any ERC-20 token and when transacting on SushiSwap Exchange, a fee of 0.3% will be charged and 0.25% of this trade will go back to the users that make up the LP group.

In exchange for maintaining liquidity in these groups, LPs are rewarded with these fees, in addition to a portion of the SUSHI minted daily on the platform. The best part is that users can claim their funds at any time.

What are the risks of holding?

As with any liquidity pool, there is a risk of suffering losses due to IL, but also that the borrowing APY goes up in price or that the platform suffers from theft of funds.

BONUS

5. Hodling

The term “hodling”, also known as “hold on for dear life” in the crypto world, is used to define those who simply hold onto their cryptocurrency as a long-term investment strategy without worrying about the rise and fall in the price of tokens.

This is not a form of yield farming in its most pure essence, but you can also see it that way for your convenience – especially if you don’t have experience with crypto finances.

Hodling is a strategy used by people who don’t have the skills or the time to perform other types of operations, so these people invest in well-established projects for long-term investment.

The objective of hodlers is that, over time, the value of the selected cryptocurrency will increase, so the most common strategy is to invest in the purchase of relatively new cryptocurrencies with very low prices so that, as the value of these assets increases, they can, insha’Allah, make a good profit on such an investment.

This form of “yield farming” has proven to be one of the strategies that has worked best for Bitcoin users.

For example, if you had invested $1,000 to acquire 1,000 BTC when the price was at $1 during 2011, at the time of publishing this blog post, you would have approximately $60 million in a period of only 10 years!

What are the risks of hodling?

HODLing won’t increase the number of cryptocurrencies you have in your hands. This means that you will only make a profit if the cryptocurrency increases in price in the long term. But remember that the opposite could also happen, with which you would lose money instead of increasing.

Is Yield Farming halal?

Is yield farming halal? When it comes to yield farming, staking, as in Proof of Stake, is generally considered halal, while the other 3 types of yield farming, liquidity pools, lending and borrowing, and yield from redistribution fees would be considered questionable or even haram.

Proof of Stake is generally considered halal as you are earning yield for providing security to the network. This is obviously assuming that the network itself is not dedicated or established for some haram type of activity.

Earning yield from liquidity pools could be halal so long as the pool itself is not being used for haram operations such as loaning money to others to earn interest on the loan. Muslims should strive to not purposely put themselves in situations where they are directly contributing to what is known to be haram.

When it comes to earning yield from lending and borrowing, many scholars would say that this is haram as the objective of most DeFi projects is to establish lending and borrowing contracts that will allow the lender to earn money from interest. However, this may change if lending and borrowing contracts are established under Islamic finance investment tools such as “Murabaha” or other sharia compliant guidelines.

And as for earning yield from redistribution fees, this could also be seen as halal since you are providing a service to the platform so long as the purpose of the platform or DEX is not a lending pool where the goal is to earn interest off of loaning money by way of crypto.

All of this is said by making the assumption that the cryptocurrency you are using for yield farming is already seen as halal by scholars.

Final words

We have now explored the most common types of yield farming strategies, acknowledging that there are many variations in them. If your intention is to enter the world of yield farming, you should first familiarize yourself with the operation of the different platforms that offer this form of investment making sure that they are in harmony with Islamic principles.

Take into account that if you don’t understand what you are doing, you’ll probably lose money. Remember that the most profitable yield farming strategies are also the most complex ones and are recommended for advanced users.

It is not just about buying crypto when Elon Musk makes a comment that boosts its price, but there is a whole range of possibilities to earn much more money out there in a halal way. You just have to be well prepared and do your research.

May Allah guide you to success, Ameen.

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If you regularly read about cryptocurrencies, you probably know something about the Cardano vs Ethereum debate.

The debate to decide which of the two blockchains is better started with the beginning of the Cardano project back in 2017 and since then, more and more fuel has been added to the fire.

Although both blockchains are very similar in terms of functionality, a growing group of crypto enthusiasts claim that Cardano is superior and that it’ll be the ultimate “Ethereum killer”.

But, is Cardano better than Ethereum?

In terms of technical infrastructure, yes. Cardano is better than Ethereum in matters of limited coin supply, scalability, PoS consensus, and a “no-code” smart contract language that makes it easy for non-coders to create smart contracts. But at present, Ethereum’s strength is due to its first-mover advantage, a huge user base, and a blockchain that has massive value.

But is this all to the story? Let’s dive in a little deeper to see if Cardano is really better than Ethereum.

What are the reasons behind these claims?

Cardano vs Ethereum: the battle of blockchains

The reality is that Cardano has managed to position itself in the crypto world as a strong competitor and alternative to Ethereum. These two platforms offer an entire ecosystem for the development and execution of smart contracts and DApps, as well as an alternative to traditional financial systems — something similar to Bitcoin.

On the one hand, Ethereum with its consensus mechanism Proof of Work (PoW), gives an economic value to its cryptocurrency Ether through a series of complex mathematical calculations, although paying the price of high energy consumption and suffering a series of problems related to scalability.

On the other hand, Cardano with its consensus mechanism Proof of Stake (PoS), manages to solve the problems inherent to PoW, requiring much less energy and resources to function, while allowing faster and cheaper transactions in comparison through its cryptocurrency ADA.

Scalability, interoperability, functionality, and economic performance are the key factors that will make the difference between one blockchain and the other at the time of truth.

Let’s now take a closer look at each of these factors to determine which project is most likely to win the next third-generation blockchain battle.

How Cardano compares to Ethereum

1. Scalability

Cardano

Although Cardano’s network is currently capable of processing a maximum of 250 transactions per second (tps), it’s expected that in future updates the network will be capable of processing up to 5,000 tps.

To achieve this, Cardano’s network will make use of a protocol called KMZ Sidechains, which will allow it to run several chains parallel to the main chain to alleviate the workload.

A good example of this is the recently implemented Hydra protocol, a Layer 2 solution that will run DApps in parallel with Cardano’s Layer 1 to provide extra scalability and cheaper fees per transaction. Cardano can add as many side chains – Hydra’s heads – as it requires to keep the desired overall performance on the network.

This, combined with the consensus mechanism Ouroboros – based on PoS – will allow the network to achieve high levels of scalability and grow without experiencing bottlenecks.

Ethereum

The current version of Ethereum can only handle a maximum of 30 tps using the PoW consensus mechanism. This has resulted in the network being congested quite frequently and transaction costs skyrocketing – not to mention a high consumption of energy and resources.

However, it’s expected that when the Ethereum network is updated to version 2.0 and thanks to the change of consensus mechanism from PoW to PoS, the number of tps will increase exponentially to a theoretical max of 100,000 while decreasing the cost of transactions significantly.

2. Interoperability

Cardano

Cardano supports interoperability with other blockchains using communication protocols that will allow other blockchains to run parallel to the main chain – one of these is KMZ. This feature is already working and it’ll allow the Cardano network to expand its functionality by adding features from other networks.

The protocols implemented in Cardano to achieve interoperability will ensure the communication and exchange of data in a secure way between chains without compromising the stability of the main network, being able to connect and disconnect any external network as necessary.

Ethereum

For its part, although Ethereum doesn’t currently have this ability to communicate with other networks, there are already several external projects that will allow adding this feature once version 2.0 is fully functional.

When the time comes, Ethereum will be more open to communication and interaction with other networks, allowing the exchange of data and values ​​in a secure and private way. Some of the top projects in this area are Chainlink, Wachain, and Aion, just to name a few.

3. Smart contracts and DApps

Cardano

Currently, Cardano already allows the development and execution of smart contracts and DApps; however, this most recent update had presented concurrency issues when executing smart contracts on the blockchain. In addition to this, it’s still lacking a well-developed ecosystem in terms of DApps.

On the other hand, the mechanism used in Cardano for the development of both smart contracts and DApps will make the technical aspect more accessible – through the Marlowe programming language – so that any type of user is able to create smart contracts and applications, as well as make it easier for the interaction of these programs with others inside and outside the network.

And while Cardano may be lacking a well-developed DApp ecosystem, insha’Allah this will soon change as there are multiple DApps in the works for Cardano. Building on Cardano is an excellent website to see projects being developed for the Cardano blockchain.

Additionally, Cardano has recently added a new feature called ERC-20 converter, a software tool to help developers migrate ERC-20 tokens to Cardano to avoid paying high gas fees and the lack of speed in transactions. Actually, at least 100 projects are expected to migrate as soon as the tool goes mainnet.

Ethereum

Ethereum is currently the pioneer and world leader of blockchains in terms of smart contracts and DApps. Since its inception in 2015, Ethereum hasn’t stopped growing in this sense, and the use of smart contracts and DApps has become popular in other blockchains thanks to this.

At this time, Ethereum already has more than 3,000 decentralized applications that work mainly in the DeFi and NFT spaces, but that also include games and tools of all kinds.

Thanks to the use of standardized types of tokens (ERC-20 and ERC 721), Ethereum has managed to build a huge and robust ecosystem in which communication and interaction between the different projects developed within the network are possible.

4. Tokenomics

Cardano

Since its introduction to the market in 2017, ADA has been gaining more and more acceptance among investors. Even though Cardano is still in development, each new major update seems to positively influence the price of this cryptocurrency, returning more than 7,000% since its introduction to the market.

This is reflected in its market capitalization ($62B) and its current price ($1.95), factors that have maintained a relatively slow but constant increase over time.

We should also consider that this cryptocurrency has a maximum supply of 45B units. This abundance of coins is one of the factors that contribute to keeping the price of ADA low.

However, the inflationary mechanism of ADA, added to the progressive decrease in the supply of currencies to the market as well as other factors and new developments on the blockchain, will contribute to the price of this asset increasing over the years insha’Allah.

Ethereum

Being Ethereum, the leading blockchain in the sector of smart contracts and decentralized applications, it’s normal that, even with the high fees, this network remains with the second largest market capitalization ($510B), only below Bitcoin.

In a similar way to what has happened with ADA, the price of Ether has been increasingly influenced by the advances in future updates of the network and as the date of ETH 2.0 approaches, it seems that the price of Ether tends to go up, already passing $4,000.

At this point, it’s important to point out that Ethereum has an unlimited supply of coins, with an increased supply programmed to an annual inflation rate of 4.5%. This is countered by the new EIP-1559 “London” update that burns a portion of the transaction fees thus decreasing the coin supply. This could lead to an increase in price in the future; something investors are looking forward to.

Due to this fact, it’s not surprising that there is an increasing demand for Ether in the market, something that is also boosted by the current NFT fever, where Ethereum plays a predominant role.

Cardano vs Ethereum: a fierce and close battle

To determine which of the two blockchains is – or will be – the winner of this battle, there is a key factor to consider: which of the two blockchains will offer more value, Cardano or Ethereum?

One of the main problems that Ethereum faces today has to do with scalability and the high cost of transactions, a problem for which Cardano has presented a solution from the beginning. While it’s true that the issue of scalability in Ethereum should be solved in version 2.0 when sharding is implemented, we will still have to wait until 2022 or 2023 to see this.

Currently, ADA has extremely low fees (close to 0.17 ADA), something that gives it a lot of stability. The problem is that Cardano doesn’t have a user base like Ethereum to take advantage of this – although I do believe this will eventually happen insha’Allah.

In addition, there is another factor that works against both projects, and it is the fact that neither of the two blockchains is fully operational.

Now, speaking in technical terms, at this time Cardano would have the advantage since this project is being developed using a scientific methodology, it’s peer-reviewed, and also very easy to audit thanks to the use of Haskell. Meanwhile, due to the use of its Solidity programming language, audits on Ethereum are much more difficult to perform.

Cardano also has a double processing layer to work with two process flows separately; computations are made on layer 1, and settlements are made on layer 2. Ethereum only uses one layer to run all processes, which is inefficient.

In terms of power consumption, Cardano is much more efficient than Ethereum due to the use of PoS, but the latter network should solve that problem by moving to version 2.0.

In economic terms, at the moment Ether has more value than ADA, naturally due to the advantage of being out first and having the effects of a large network of users and a well-developed software ecosystem. However, keep in mind that the supply of ADA is limited and this could give a strong boost to price increase in the near future. Of course, this will also depend on the offer of functions.

Final verdict

My personal opinion is that there is space in the crypto ecosystem for both platforms to coexist, at least for a few years.

The reality is that it’s impossible to predict whether one blockchain will end up wiping the other off the map since both projects are moving in practically the same direction.

Once both blockchains are fully functional and PoS becomes the new norm, eliminating problems related to energy consumption, scalability, and high fees, the preference of users for one or the other network will depend on the creativity of developers – something similar to what happens with videogame platforms.

This means that healthy competition will motivate the creation of more and better DApps, as well as the constant implementation of improvements to each network. If we add to this the new projects that are preparing to also compete with Ethereum, we will have many more options to choose from very soon.

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Among the many blockchain projects that exist today that seek to dethrone the powerful Ethereum and its cryptocurrency Ether from its second place hold among the list of most popular crypto assets, there are two that stand out above the others: Solana and Cardano.

In recent months, these two projects have grown in popularity, attracting the attention of more and more investors. Naturally, this sudden interest in both projects has caused both SOL and ADA – the respective cryptocurrencies of these blockchains – to have increased in value significantly, reaching their all-time high prices and a market capitalization of around $50B and $80B respectively.

Based on this, the million-dollar question is:

Which of the two is better?

In this post, “Solana Vs Cardano”, let’s explore and find out.

What is Solana?

Solana is an open-source blockchain project that aims to drive the development of next-generation DApps. The people behind the Solana (SOL) project want to offer a highly scalable, secure, and decentralized platform, which also doesn’t require powerful hardware or a large amount of power to operate.

For this, Solana is based on a third-generation Proof of Stake (PoS) consensus in which it integrates a unique mechanism to achieve a reliable and secure system based on determining the time of a transaction; this is known as Proof of History (PoH).

Solana has been developed from the ground up to be a highly scalable blockchain and through the PoH system, it’ll be able to support thousands of transactions per second (tps) – its developers speak of 50,000 or more.

What is SOL?

As usual, Solana has its native cryptocurrency called SOL, which works as a utility token. SOL is used to pay transaction fees and to display and interact with smart contracts, allowing its holders to become network validators as well.

At present, different DApps are being developed for Solana that seek to provide new uses for SOL, including a DeFi voting mechanism.

What is Cardano?

Cardano is an open-source smart transactions platform that aims to offer scalability and security solutions under a layered design. This feature gives the system great flexibility and makes its maintenance much easier with updates through soft forks.

Cardano is a blockchain with a scientific approach and a rigorous and robust design that will allow the execution of a high volume of financial transactions with a high level of cryptographic security using a PoS consensus mechanism called Ouroboros.

This third-generation blockchain will also allow the development of smart contracts and DApps, and can be used by individuals, organizations, companies, and governments around the world to develop tailored solutions.

What is ADA?

ADA is the cryptocurrency of the Cardano project and it’s the coin that allows users to operate on the network. The ADA token also acts as a management token, as it allows users to vote in order to decide on possible changes to the way the project will work and develop.

According to its developers, ADA represents the future of money, since it’ll make direct and immediate transfers possible, at almost no cost.

How Solana compares to Cardano

Let’s take a look at the differences and similarities between Solana and Cardano, taking into account several key aspects of what is expected of a third-generation blockchain.

1. Scalability

Solana

The Proof of History consensus algorithm used by Solana is a solution that saves time and resources when confirming transactions. PoH is actually an addition to the PoS consensus that helps to validate the order of transactions in extremely short periods of time, making the network much faster.

Through this mechanism, transaction validators have less information to process in each block, which combined with Solana’s ability to execute processes in parallel – as I’ll explain later – significantly increases the scalability of the network. Although it currently supports 50,000 tps, Solana could theoretically support up to 500,000 tps.

Cardano

For its part, Cardano has the KMZ Sidechains protocol. Using KMZ, Cardano can handle a whole series of parallel chains to increase its scalability as needed.

In this way, Cardano allows the movement of funds between its different layers safely as well as external blockchains, thus sharing the workload and speeding up transactions exponentially.

This feature, combined with Cardano’s consensus mechanism called Ouroboros, currently allows it to process between 50 and 250 tps, but according to its developers, upcoming network updates would allow to validate up to 5,000 tps.

2. Interoperability

Solana

Currently, Solana has the Wormhole protocol, a technology provided by Certus One, a provider of distributed ledger technology (DLT) that offers a secure and decentralized bridge that for the moment, will allow Solana to connect with Ethereum.

However, Wormhole will allow Solana to communicate not only with Ethereum but also with many other projects and platforms to move crypto assets without the need for intermediaries to take advantage of the speed and efficiency of its network.

Cardano

Introducing sidechains interoperable with Cardano’s main chain – very soon – will give Cardano immense potential to expand its network capabilities. This will allow the introduction of new features from external projects without affecting the security of the main blockchain.

In combination with the KMZ protocol, it’ll make it possible to move funds safely from Cardano to any blockchain that uses the same protocol, creating interactions without the need to share private data.

3. Smart contracts and DApps

Solana

Solana has the ability to execute smart contracts and validate transactions in parallel. Sealevel is the name given by the developers to this feature.

Sealevel allows Solana to read, execute, and write instructions in parallel within the execution layer of smart contracts. In this way, a single smart contract would be capable of executing multiple tasks at the same time. This is a major difference from Ethereum, which can only handle one task at a time.

Regarding DApps, the idea behind Solana is to provide more efficient support for them, but also for DeFi. To date, the Solana ecosystem has almost 500 projects available, some of which are already operating, while others are still in the development stage.

It’s a healthy ecosystem where you can find all kinds of apps, DeFi, exchanges, NFTs, games, and more.

Cardano

The next era of Cardano, Goguen, will add smart contracts and the ability to build DApps on Cardano’s strong foundation of high-security research, peer review, and development.

The best thing about this will be that any type of user, with or without technical knowledge, will be able to create and execute functional smart contracts on the Cardano network thanks to Marlowe, a high-level language specific for smart contracts – try writing your own Marlowe smart contract here.

In turn, part of this mechanism will also make the creation and interaction of DApps with smart contracts within and outside the network easier.

Speaking of DApps, Cardano recently received the Alonzo update, which already allows it to run smart contracts and DApps on its network, as promised.

However, due to a series of technical problems that have arisen, a large number of developers have delayed the launch of their projects and at present, Cardano doesn’t yet have a robust ecosystem full of DApps, something that has negatively influenced the value of ADA in the market.

4. Tokenomics

Solana

SOL, Solana’s native token, is currently in the top 10 most popular cryptocurrencies in the world, with a market capitalization of $48B, according to CoinMarketCap.

The maximum supply of this asset is 489 million, somewhat low compared to other similar coins. Naturally, this makes SOL’s price higher, especially when compared to ADA.

SOL has a planned inflation with an average rate of 1.5% per year, starting at 8% in 2021. This is good to motivate the adoption of the cryptocurrency, but it causes the price to tend to fall frequently, which is inconvenient for holders.

Cardano

For its part, ADA – which is also among the 10 most popular cryptos – has a market capitalization of $70B, according to CoinMarketCap. This is a position that it has held steadily for months.

The maximum supply of ADA is 45 billion coins, which is one of the factors that keep the price of this crypto asset below the price of SOL.

The ADA inflation rate will continue declining for several years to the point where new supply is so low that it becomes deflationary, which could lead to a significant price increase.

Solana vs Cardano – What are the future projections?

The difference in price and supply of both SOL and ADA is one of the main factors – if not the most important – to think about when deciding on one cryptocurrency or another, considering that both projects belong to third-generation blockchain technology.

In this case, for investors, the best option might be to adopt both cryptocurrencies but with a different approach based on time.

To begin with, both cryptocurrencies have remained with constant rises and falls in price, mainly due to the influence of their different stages of development.

Many analysts agree that the upcoming Ethereum updates will positively influence the price of both assets when a third-generation blockchain war breaks out.

Now, considering that SOL has a lower market capitalization than ADA, this could bring a much higher return on investment in the medium and long term if Solana manages to place itself in a better position than it currently has – but also the risk for the investor will be higher.

Based on this, the best strategy could be to acquire ADA to keep it as a long-term investment, while SOL could be used to carry out swing-trading operations, playing with the constant variations in price. This is a very common strategy when making investments in the crypto world.

Final thoughts

It’s too early to say at this point which of these two blockchain projects is superior to the other. Both Solana and Cardano are third-generation blockchains that promise great improvements to the crypto ecosystem.

Without going into too much detail, the fact is that the market sees these two projects as having a lot of potential, but neither of them is yet fully functional.

Although both projects have been nicknamed as “Ethereum killers,” Buterin’s blockchain continues advancing in developing solutions to its current flaws, so I see it unlikely that any project will wipe it off the map yet – improbable, but not impossible.

Meanwhile, the safest option for crypto investors is to have a varied portfolio that allows them to operate and make decisions with ease and without going to any extremes. As always, this should not be taken as financial advice, but rather, crypto education. Always make sure to do your own thorough research before investing.

And in the end, Allah knows best.

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In 2017 I wrote a blog post called, Is Bitcoin Mining Halal or Haram?, and we came to the conclusion that at that time there was no consensus among scholars about whether mining Bitcoin is halal or haram. Rather, we stated that Bitcoin mining is halal because there was no obvious evidence to suggest that mining Bitcoin is haram.

However, years later, this question is still being asked by many so I figure it’s time for an update.

Is cryptocurrency mining halal or is Bitcoin mining halal? The simple answer is, yes. Bitcoin mining is halal. Bitcoin mining is nothing more than the act of verifying transactions on the Bitcoin blockchain by a Proof of Work protocol. Bitcoin miners who successfully verify transactions are providing a service to Bitcoin users as well as providing security to the Bitcoin network and they are rewarded Bitcoin for their effort and there is nothing haram with this.

Great! You have an answer to your question. But now you must be thinking, but what about those who say Bitcoin is haram and in addition to that also say, or imply, that Bitcoin mining is haram?

If this is your thought process, then please read on.

Is mining crypto haram?

In my previous blog post, Is Bitcoin Halal? 10 Scholars’ Opinion on Bitcoin, I noted that some scholars have said that all aspects of cryptocurrency are haram and this includes mining Bitcoin.

Two of the main reasons some scholars have said that crypto mining is haram are:

1. Bitcoin (or any cryptocurrency for that matter) is not backed by a government; therefore, all aspects of Bitcoin, including mining bitcoin, is haram since there is no government approval.
   
2. Bitcoin mining is resource intensive and uses too much energy which in turn is bad for the environemnt; therefore, Bitcoin mining is haram.

But how accurate are these two reasons as to why some scholars would rule Bitcoin mining as haram and can we say that the above-mentioned reasons are, reasonable?

Bitcoin backed by government

For those scholars who say that all aspects of Bitcoin are haram because Bitcoin has no government backing, they mean that governments do not recognize Bitcoin as currency, money, or legal tender; therefore, Bitcoin, and this includes Bitcoin mining, would be seen as haram.

However, over the past 10 years since Bitcoin has been around, more and more governments have changed or updated their laws allowing their citizens to participate in crypto markets with governments recognizing Bitcoin as either a currency, an asset, or even property.

2021 has also marked the first time that a country’s government has not only allowed the permissibility of Bitcoin use for its citizens, but it is the first time that a government has also recognized Bitcoin as legal tender. In other words, we finally have Bitcoin backed by a government.

In June of 2021, President Nayib Bukele of El Salvador made history by passing a bill in the Salvadorian congress making it a law approving Bitcoin to be used as legal tender.

This now begs the question, since Bitcoin is backed by a government, El Salvador, is it then halal for Muslims in El Salvador to use Bitcoin? It seems that the answer would be, yes.

And what about mining Bitcoin? El Salvador has not only recognized Bitcoin as legal tender but the government will launch a Bitcoin mining initiative for the country as well. We’ll touch on that later in this blog post.

Now, are we saying that all countries recognize Bitcoin as legal tender or all countries approve the use of Bitcoin – and this includes Bitcoin mining – of course not. We know that China has just recently banned Bitcoin mining in their country.

Update: China has now banned ALL cryptocurrency activities.

Regardless of this, we are observing a growing acceptance by governments worldwide to explore the use of cryptocurrencies in their countries and/or allow their citizens to use cryptocurrencies even when there are no clear laws or guidelines in place or even if the government does not implement a law stating that Bitcoin is legal tender.

Bitcoin energy consumption

Another argument made by some scholars as to why Bitcoin mining is haram is because it is commonly stated that Bitcoin mining electricity consumption utilizes large amounts of energy to mine transactions and is therefore bad for the environment.

This has also been mentioned by our sheikh, Assim Al Hakeen, and I have touched on this in a blog post called, 10 Reasons Why Bitcoin is Haram. Sheikh Assim Al Hakeem Bitcoin Fatwa.

I have also been of the mindset that Bitcoin mining is resource-intensive and uses a high amount of energy to mine Bitcoin. However, the question that I failed to ask myself was, Bitcoin mining is resource-intensive compared to what?

When comparing Bitcoin mining to the energy consumption of the banking and gold industry, two industries that Bitcoin is regularly compared with, then we begin to see a different story.

Galaxy Digital has released a report called, On Bitcoin’s Energy Consumption: A Quantitative Approach to a Subjective Question, which states that Bitcoin mining uses less than half the energy of what is used in the banking or gold industry.

The chart below shows that the banking industry uses around 263.72 TWh per year and the gold industry uses about 240.61 TWh per year and Bitcoin uses less than half the energy of both of these industries, 113.89 TWh per year.

So, is Bitcoin mining resource-intensive? Does Bitcoin mining use a lot of energy? The answer is, yes. But so are other industries that are a mainstay of human life – the banking and gold industry. As we stated, annually, they both consume more energy than Bitcoin.

So if the argument is that Bitcoin mining is haram because it is resource-intensive and not environmentally friendly, then the same argument must be made for the banking and gold industries.

So what are possible solutions? Are there alternatives as to how we can mine or verify Bitcoin and cryptocurrency transactions in a manner that is environmentally friendly?

The answer to that is, yes. We are now seeing cryptocurrencies such as Cardano, Dash, and Ethereum already utilize or plan to move to a Proof of Stake (PoS) protocol which utilizes less energy consumption than a Proof of Work (PoW) protocol.

Cardano claims that their PoS protocol utilizes 6 gigawatt-hours of energy annually which is far less than Bitcoin. Now, will we see Bitcoin move to a PoS protocol? I doubt it, as many Bitcoin advocates hold the belief that Proof of Work is the most robust and secure way to secure the network and do not want to see that change, but it could be that future cryptocurrencies will put their focus on PoS rather than PoW to address environmental concerns.

In addition to moving to Proof of Stake, another solution would be to utilize renewable or clean energy for mining cryptocurrencies.

Remember how we noted that El Salvador has also launched a Bitcoin mining initiative? Well, the El Salvadorian government is planning to utilize their geothermal resources, volcanic energy, to mine Bitcoin thus making Bitcoin mining environmentally friendly by utilizing renewable and clean energy.

So, do we finally have Bitcoin that is backed by a government? Yes.

Do we have Bitcoin being mined by clean energy or do we have cryptocurrencies moving to a more environmentally friendly way of verifying transactions by protocols such as Proof of Stake? Again, yes.

Since this is the case, then I foresee scholars changing their opinions on their ruling of Bitcoin and not making such blanket statements.

Muslim countries and cryptocurrency mining

Now you may be saying, well, that all sounds great for El Salvador, but what about Muslims in Muslim countries? Is cryptocurrency mining halal in Muslim countries?

Well, I have another blog post called, Muslim Countries Where Bitcoin Is Legal Or Illegal, where you will not only see a list of Muslim countries and their legal stance on Bitcoin but you will also see that some of the countries highlight cryptocurrency mining initiatives that are underway in their respected countries.

Pakistan is one of those countries. Pakistan has launched a cryptocurrency mining initiative for the province of Khyber Pakhtunkhwa to build Bitcoin mining farms with the hopes of opening up their mining farms to investors in the future.

Kazakhstan has also been taking lead in the Muslim world when it comes to having government-backed cryptocurrency mining initiatives and has already produced a number of cryptocurrency mining farms.

In an article by Aizhan Abilgazina, A New Kind of Mining: Kazakhstan Stakes Its Claim in the Cryptocurrency Industry, Aizhan states,

Kazakhstan has seen a significant growth in cryptocurrency mining activities with around $200 million having been already invested in 13 mining farms that are operational around the country with four more under construction.

By Aizhan Abilgazina

The Kazakhstan government also has plans to actively seek outside investors who are seeking cryptocurrency mining in their country.

Last month, Kazakhstan’s minister of digital development, innovation and aerospace industry, Askar Zhumagaliyev, announced that the department is planning to attract 300 billion tenge, or $738 million, worth of investments by 2023 for activities related to cryptocurrency mining.

Source – Asia Times

The only downside I see to cryptocurrency mining in Kazakhstan is that half of their energy consumption comes from coal and coal tends to be considered as “dirty energy”.

Conclusion

Again, we are seeing an evolution as to how governments, more specifically, Muslim governments, are interacting with cryptocurrency and the blanket argument that Bitcoin does not have government backing and therefore Bitcoin mining is haram does match realities on the ground.

And in all fairness, many of the scholars who said that Bitcoin and Bitcoin mining is haram had declared such opinions years ago. Times change, new information becomes available, and it may be that these scholars have also changed their opinion.

We have come a long way since Bitcoin and cryptocurrency hit the world stage over 10 years ago and as our overall understanding and education of cryptocurrency has evolved, so has the opinion of our scholars.

So, is Bitcoin mining halal? According to a number of scholars, yes. You are providing a service and being compensated for that service. The only thing you must do now is to check your government’s legal rulings on cryptocurrency.

And in the end, Allah knows best.

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Since the earliest civilizations, humans have always been attracted to collecting “special” objects to which they have assigned a certain value, for different reasons. In the past, this collecting mania could be reflected in any physical object, be it coins, artwork, vehicles, even rocks.

But we’re in the middle of the digital age and now, this collecting fever has a new exponent that’s causing a true sensation among lovers of the rare and exclusive: Non-Fungible tokens or NFTs.

But what exactly are NFTs, how do they work, what can you do with them, and most importantly for investors, do they have a future?

Take a look at this quick guide to find the answers to all these questions.

What are NFTs?

Non-Fungible Tokens (NFTs) are basically tokens based on cryptography that only exist on a blockchain. These tokens have unique characteristics that make them unrepeatable. These tokens can represent unique assets from the digital world or digitized versions of objects from the physical world.

In addition to this, NFTs can also be used to demonstrate the authenticity and ownership of different assets on a blockchain, acting somewhat like a digital fingerprint.

NFTs are different from fungible assets, that is, objects – both physical and digital – that can be exchanged with other objects of identical properties.

We have a good example to illustrate this in money; it doesn’t matter whether it’s physical like the dollar, or digital like Bitcoin (BTC): you can easily exchange one Bitcoin for another Bitcoin. This is possible because 1 BTC keeps the same value when you exchange it for another BTC; they’re equivalent and have exactly the same properties.

Non-fungible assets can’t be substituted in the same way as fungible assets because they are unique, unrepeatable, and have different characteristics.

Another good example of this is in artwork from famous painters.

You can see each of those paintings as a non-fungible token because although they’re all paintings, they’ve different properties and value; they’re unique, and you can’t exchange one of these paintings for another because there is only one original painting.

The good news is that these assets can also be represented in the digital world in the form of crypto tokens; thanks to information technology, it’s possible to “imprint” special marks that make each one of them unique.

The basis of NFTs are smart contracts

Today, virtually anything can be represented digitally, and the Ethereum blockchain is perfect for it. In fact, it’s this blockchain that has the highest percentage of NFT tokens on the market, due to the use of smart contracts.

A smart contract is a small program that can be created within a blockchain, which allows you to tell the network that it should store certain information and perform certain actions. In this case, anyone with the necessary knowledge can create a smart contract for an NFT token, assigning it the characteristics they want with enormous creative freedom.

In this way, it’s possible to store anything within an NFT token, and the smart contract within the blockchain will ensure that it works correctly at all times.

What can I do with NFTs?

Although NFTs began essentially as objects for entertainment and collectibles – KryptoKitties – today the market has expanded enough to find practically infinite uses for this technology. Let’s take a look at some of these use cases.

Digital Art

It’s possible to store information from artwork, jewelry, and other artistic objects on the blockchain in the form of NFTs.

This not only helps in motivating updates, circulation, and sharing through several markets, but it also helps in tracking unique digital art in the form of NFTs to verify its provenance, authenticity, and scarcity.

In fact, NFTs are already being developed for artwork such as paintings and sculptures that include professional certificates. The owner only has to show the unique information stored in the corresponding NFT to demonstrate that he is the owner of such work.

It’s easy to trace this digital certification because the ownership of these assets is already registered in the blockchain.

Video games

The creation of NFTs for different virtual objects from videogames allows you the in-game exchange of such accessories for points or digital currencies, and even for real money. This is something that we’ve already seen in the past, but blockchain and NFTs are doing a great job in creating and improving this online ecosystem or virtual economy.

When you play one of these games, you can obtain items such as weapons, clothes, skins, etc. These items will have their own related NFT, and they’ll be stored on the blockchain.

In this way, all the operations and properties related to such items will be registered in a public database, avoiding the possibility of cheating by malicious users. Some examples of such NFT-based games include:

• Sorare: In Sorare, you can purchase NFT tokens that represent professional soccer players. You can later use these tokens to play online fantasy games.

• Decentraland: A virtual world pretty similar to Second Life, where you can buy, sell, and exchange ERC-721 tokens and participate in different in-game events such as art shows, games, concerts, etc.

• Gods Unchained: A turn-based collectible card game where you can compete against other opponents.

Digital tickets

Many companies are using NFTs to represent digital tickets for different types of events, such as musical concerts and sporting competitions. These NFT tickets represent your unique permission to participate in those activities at a specific time and place, and you can’t convert this right into something else.

Using NFT technology ensures that each ticket is unique and valid at the time of use so that this will prevent the use of false tickets.

Identity tests

NFTs are also being used for identity authentication to help in keeping a complete record of personnel in public and private organizations. The technology can be applied to birth certificates, passports, and driver’s licenses, just to give you an idea.

These types of NFTs cannot be exchanged, but it’s perfectly possible to implement access control to obtain the information stored in them. This is a very practical application because it allows the interaction with NFTs so that organizations can obtain information about any individual, such as their educational level, for example.

On the other hand, an individual can do the same, requesting identity information from a doctor to verify their professional level.

Digital certificates

NFTs can be used to store information about different types of documents such as contracts, patents, and other similar certificates on the blockchain. This is an efficient way to make these documents traceable and prevent counterfeiting.

These digital certificates can store attributes such as intellectual property values, copyrights, etc. When it’s necessary, you can verify the validity of these documents using electronic signatures.

Domains

Domains are unique and can be very valuable, so it can be very costly and time-consuming to find the most appropriate for you. It’s possible to link domains to NFTs to create a public record for tracking purposes. This can help avoid third parties in domain trading, which also contributes to reducing costs due to speculation.

Some NFT coins to keep an eye on

Enjin (ENJ)

Enjin is a platform that allows individuals and organizations to create their own NFTs. In order to mint these virtual tokens and objects, you must acquire and block ENJ, Enjin’s cryptocurrency.

Decentraland (MANA)

Decentraland is a virtual world similar to The Sims or Minecraft in which users can buy and sell digital real estate while exploring and interacting with this virtual world. The game uses two tokens: LAND is an NFT token that represents unique parcels of land within the game, while MANA is a cryptocurrency that facilitates the purchase of LAND, as well as other virtual goods and services.

Axie Infinity (AXS)

Axie Infinity is a Pokémon-like virtual pet world that runs on Ethereum. Players can fight, collect, raise and build a kingdom for their pets (Axies) and have the AXS token, which is used for the governance, staking, and payment system.

WAX (WAX)

WAX is a platform that allows its users to create virtual markets to buy or sell digital items, especially games. For these transactions you must use the internal currency called WAX token.

Cardano (ADA)

Cardano is a third-generation blockchain platform with a scientific approach that promises great improvements to the crypto ecosystem and that, thanks to the use of smart contracts and dApps, will offer an ideal environment for the development of NFT tokens. All this is governed by the use of its cryptocurrency ADA.

Origin Protocol (OGN)

Origin is a platform very similar to Enjin, but that not only serves for the development of NFT tokens but also allows users to earn money that supports the development of projects within the platform through a model based on DeFi. Its internal currency OGN has the function of regulating the economy and the future of the platform.

Do NFTs have a future?

NFTs are a very recent technology in the crypto space. Although they have existed almost since the beginning of Bitcoin – does anyone remember the Colored Coins? – It wasn’t until the beginning of 2020 that a real craze for these digital assets began.

So much so, that almost every day it was possible to read in the news about a new NFT created and sold for hundreds of thousands and even millions of dollars in a matter of hours.

The truth is that, according to history, when too much money moves around something new that generates a lot of hype, the risks also increase exponentially where scams and the risk of a bubble can be the order of the day.

However, even with all the madness surrounding NFTs, the reality is that this technology has many practical uses, as you may have read in a previous section.

The blockchain technology that makes NFTs work provides them with numerous possibilities to position themselves as digital objects of common use; as technology advances and matures, it is very likely that more and more people will become familiar with the use of NFTs.

The problem with this is that being such a “new” technological phenomenon, this maturing process takes time, and meanwhile, it seems that the bubble has already started to deflate, as we can read in the news.

So, as we always say, before jumping into the world of NFTs, you should proceed with proper education and caution before taking action.

Are NFTs halal?

Are NFTs halal? Yes. NFTs are nothing more than cryptographic tokens on a blockchain that have unique characteristics that make them attractive to collectors and investors or serve some purpose that the NFT can be used for. So long as the characteristics of the NFT do not convey or promote anything that is considered haram by the sharia such as, pornography, illegal drugs, cruelty to animals, anything that promotes hatred towards Islam, etc., then the NFT is permissible to create, use, and earn income from.

Another excellent article to read on the permissibility of NFTs would be, What are NFTs? by Mufti Faraz Adam.

Conclusion

NFT tokens are another technology option within the wide range of possibilities offered by blockchain. The number of practical applications to the real world is enormous, with all kinds of applications for identity, security, business, arts, and entertainment in the digital world.

Of course and as always happens, there are many people who simply want to make some money with new technologies as an investment, but like everything related to crypto-assets and with any investment in general, you have to take precautions before investing.

What we see now is just the tip of the iceberg of what can happen around NFTs – and maybe cryptocurrencies as well – but insha’Allah, in the future, surely non-fungible or NFT tokens will continue to surprise us with their enormous versatility and possibilities. There are a lot of people banking on that.

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Please note that I am not a financial advisor. The following article is for the sole purpose of providing educational information on the topic discussed.

Introduction

Among so many interesting projects within the crypto world, Cardano (ADA), a third-generation blockchain, is one that promises to revolutionize the sector by offering great improvements in the crypto ecosystem in the near and long-term future.

And as Cardano is a project still in development, interested investors who like what they see in Cardano, yet have seen many past projects turn out to be failures or simply scams wonder, is Cardano a good investment?

From what I see, Cardano is a project worth researching and taking a serious look at for the investor who is looking for sustainable, long-term profits with a blockchain that shows the potential to be highly efficient, versatile, and scalable.

In this article, we’ll discuss everything you need to know about Cardano, how it works, and the features that can make it an interesting option for new investors.

What is Cardano ADA?

Cardano is an open-source platform based on blockchain technology that’s built in layers and is capable of executing smart contracts and financial applications to be used by companies, consumers, and governments in any country in the world.

The platform has its own cryptocurrency called ADA and currently, it can be used to send and receive digital money through fast, direct, and cryptographically protected transfers.

Being a software platform developed in layers, Cardano makes it very easy for different teams of coders and engineers to maintain and update the blockchain with soft forks.

Like Ethereum, Cardano has the ability to run decentralized applications (dApps) and smart contracts, but with the difference that Cardano has a scientific research-based approach to solve the important problems faced by today’s economy.

The origins of Cardano

With the creation of the IOHK company in 2015, the development of the Cardano project also began. IOHK was created by Jeremy Wood and Charles Hoskinson – the latter is one of Ethereum’s co-founders.

After two years of development, the Cardano project saw light on September 23, 2017, when the first block of its cryptocurrency ADA was successfully mined.

The name of the project derives from Girolamo Cardano, an Italian physician, and academic who performed the first systematic calculations of probabilities. The name of its native ADA token derives from Ada Lovelace, a renowned English mathematician, and writer, recognized as the first computer programmer in history.

How is Cardano different from Ethereum?

Both Ethereum and Cardano are platforms for the development and operation of decentralized applications (dApps) and smart contracts. However, the similarities between both projects end there, since both blockchains have important differences regarding their consensus mechanisms and architecture.

Consensus mechanisms

Both Bitcoin and Ethereum use Proof of Work (PoW) as a consensus algorithm; miners compete to solve cryptographic problems to create blocks and receive a reward. The problem is that this mechanism has several drawbacks, mainly related to high consumption of energy and hardware resources, making it unsustainable for the environment.

On the other hand, with the Proof of Stake (PoS) consensus, instead of using electricity to solve mathematical problems and create new blocks, the node that will form the new block is selected randomly, in proportion to the size of the stake it has, according to the records on the blockchain. The reward that the node receives will also depend on this participation.

This mechanism is much more efficient both in terms of energy and processing speed, which results in several benefits such as reduced costs and transaction fees.

Governance model

Cardano’s ultimate goal is to compete to be the leader in decentralized finance. As with Ethereum and Binance Smart Chain, Cardano will offer its blockchain so that other developers can create and host their projects and create their own tokens quickly and safely.

But unlike its competitors, Cardano will offer a new model of democratic governance that will also provide it with greater decentralization and independence in the future.

Although Cardano was created under the patronage of a centralized organization, IOHK, this won’t be a decisive factor in the future evolution of the project. For this, they’re creating specific mechanisms so that the Cardano community itself decides for its future through a voting system based on democracy and meritocracy.

This system will allow electing the best qualified people to make important decisions regarding the network by means of community voting.

Architecture

Unlike other blockchains, Cardano has two layers: a settlement layer and a computational layer. The first layer, Cardano Settlement Layer (CSL), allows users to send and receive ADA from one wallet to another. The second layer, Cardano Computation Layer (CCL), is still under development and will allow users to create and participate in smart contracts.

Unlike Ethereum – which only has one layer – the Cardano model is more versatile, as it can be modified according to users’ requirements. An example is that this layer could be adapted to the different financial regulations for different countries. This means that ADA users could use the same currency in different countries while complying with all laws.

The computational layer will also allow the development team to make changes using soft forks without causing interruptions to the settlement layer.

Monetary system

Cardano boasts a maximum cryptocurrency supply of 45 billion tokens. This supply will move within a deflationary emission system, which will be dynamically adjusted over time according to certain variables.

It’s a complex system, but it’ll be ideal for maintaining the stability of the value of ADA as emission limits are reached. The current reward per block generated remains close to 750 ADA, but this will change over time – similar to what’s happening with Bitcoin.

For its part, Ethereum doesn’t have a maximum supply limit, but the current circulating supply is around 100 million tokens.

What makes Cardano unique?

Cardano is the first blockchain-based platform that’s governed by a scientific philosophy coupled with large amounts of academic research and constant review.

This base of scientific development is one of the most remarkable aspects of Cardano, and it’s something that almost all of the existing cryptocurrencies have skipped, including Bitcoin and Ethereum.

We have already discussed the significant improvements that Cardano will bring to the crypto industry when it’s fully operational, but in addition to this, the Cardano project has a development roadmap that provides great insight into the impact it could have on the industry.

1st phase – Byron

The blockchain came into operation with the basic functionality of ADA transfers. The network has been federated and kept regulated by a central entity, IOHK, to guarantee the proper functioning of the ecosystem.

2nd phase – Shelley

Current phase. The decentralization process begins with nodes that are managed by the community itself. A reward system is introduced to encourage users to delegate their participation in staking groups that will benefit the entire community.

3rd phase – Goguen

Smart contracts are enabled on the blockchain. This represents a huge step forward in Cardano’s ability to allow decentralized applications (dApps) to be built on a solid foundation.

This phase also represents a small revolution in blockchain since, when completed, it’ll allow any type of user – with technical knowledge or not – to create and execute smart contracts using two key tools:

1.- Plutus

A smart contract development language and execution platform that will allow the inclusion of components inside and outside the chain, which will improve the coherence and usability of smart contracts.

2.- Marlowe

A high-level language for smart financial contracts that is based on Plutus. Marlowe will allow Cardano to be accessible to a much wider user base of financial and business experts as it will allow anyone without coding knowledge to create smart contracts with its simple drag and drop interface.

Another significant aspect of Goguen is the addition of a ledger with multi-currency support that will allow users to create new tokens with native support, both fungible and non-fungible (NFTs).

4th phase – Basho

Sub-chains are introduced to improve scalability and interoperability, trying to optimize the network as much as possible to better support the growth and adoption of high-volume transaction applications.

These side blockchains will interoperate with the main chain to expand the capacity of the network and free it from a part of its workload, as well as allowing the introduction of experimental features without affecting general safety.

All of this will provide a network infrastructure with the ability to scale sustainably and securely while maintaining high performance.

5th phase – Voltaire

The governance model and self-financing will keep Cardano decentralized and independent. Thanks to the introduction of a democracy-based voting system, Cardano’s community will use their voting rights to influence the future development of the network.

In addition to this, future network developments may be financed through a treasury system in which a fraction of all transaction fees will be pooled to provide the necessary funds.

The successful completion of this last phase will allow Cardano to be 100% decentralized, so it will no longer be under the administration of IOHK, but in the hands of the community itself.

Cardano in Africa

The Cardano network promises important changes and improvements in the blockchain industry, and although it’s a huge, complex project, still under development and whose implementation could present flaws, at IOHK they have already started working to demonstrate the potential and strength of their proposal.

The best example of this can be seen in the number of technological projects based on the Cardano blockchain that IOHK, together with other companies and organizations, are developing in Africa (Cardano Africa), starting with Tanzania and Ethiopia.

One of the most important projects that will see the light in a very short time, aims to bring sustainable connectivity to the internet through the use of solar energy – in these countries only 15% of the population has access to the internet.

This project will provide affordable network nodes based on Cardano’s blockchain infrastructure. These nodes will act at the same time as local relays for internet connectivity.

Upon completion of this first phase, the next project, Atala PRISM, will provide its subscribers in Ethiopia access to a digital identity solution that will allow them to use services such as education, digital banking, healthcare, and telecommunications.

It’s important to emphasize that this last project is developed within the framework of an agreement between IOHK and the Ministry of Education for Ethiopia to provide digital identity – and therefore expand study and work opportunities – for about 5 million students and teachers in Ethiopia.

In addition to this, there are also a growing number of companies that are partnering with IOHK to develop projects based on the Cardano blockchain in Africa. Among the most important we have:

• SingularityNET: Robotic and AI systems in the scientific field

• iceaddis: Incubator for local technology startups

• World Mobile: Mobile Internet connectivity throughout Africa

• Save the Children and COTI: The Cardano Foundation, together with these organizations, promotes the use of technology in the strata of society with the most need

• Catalyst: Program to provide funds for startups in Africa through staking pools

What is Cardano staking?

Staking is an activity that acts as a financial incentive for regular users on some blockchains. Many platforms allow staking with various objectives, either to generate earnings in the form of token rewards, interest, or some other additional benefits.

Cardano offers an additional option to ADA holders. ADA holders can delegate their participation in the network to staking groups to help grow the ecosystem while at the same time earn rewards.

In Cardano, the users who maintain their ADA coins on the network are interested parties; the size of this is defined according to the amount of ADA that each user owns and has locked in a node on the blockchain. This delegation to staking groups is what helps ADA holders earn rewards.

In Cardano, it’s the Ouroboros protocol that chooses who is responsible for creating the next block in the chain by observing the amount of participation delegated to each staking group.

Pros and cons of Cardano

Now that you have a more general knowledge about Cardano, it’s time to take a more concrete and balanced view of this ecosystem, so you’ll have a simpler understanding of whether or not it’s convenient for you to invest on the platform.

Advantages of Cardano:

The team behind the project
Cardano is being developed by a multidisciplinary team, among IT professionals and academics of all kinds. This gives the platform great credibility.

Flexibility
As it’s an open-source platform and is also being developed in layers, Cardano will have virtually unlimited flexibility to grow and adapt to future user needs.

Safety
Thanks to the PoS consensus and the decentralization factor, Cardano has scientifically proven security capabilities.

Growing support
Each month, more and more entities, both public and private, are supporting Cardano. This has resulted in a spectacular increase in the value of ADA in the market.

Disadvantages of Cardano:

Delays in the project
Cardano tries to keep up with the competition and technology but has seen multiple delays in the project. Meanwhile, the development team makes promises that we haven’t seen fully materialized.

Possibly too much versatility
Cardano has features that make it very malleable and versatile: an open voting system, the possibility of creating new native tokens, and its own ability to scale without limits. The problem is that usually, most users aren’t experts in technology, economics, or finance. This could lead to wrong decisions that could lower the value of Cardano.

Bad publicity
There have been many controversies surrounding Cardano, especially controversy regarding the origin of the initial financing of the project. All of this could decrease trust in the platform.

The future of Cardano

It’s difficult to predict the future of a project still in development, but let’s see it from a clear perspective.

While the development team has so far been good to the community, providing constant and attentive information, many people already see the delays as worrisome. In their defense, the team behind the project responds that they prefer to take their time to do their best.

This also means that Cardano has a “higher potential” for success compared to other similar projects. In this sense, Cardano is still in its second phase, but when it succeeds in implementing dApps and smart contracts, the growth in Cardano’s value could be spectacular and investors could see their patience and faith greatly rewarded.

Of course, there is also the possibility that all this becomes a total failure…

The bottom line:
If developers take it easy, then investors should do the same.

Is Cardano halal?

Is Cardano halal? Yes. Cardano (ADA) is considered halal. As we begin to see more scholars recognize cryptocurrencies as halal we also see that some scholars classify cryptocurrencies as either a currency or an asset. Cardano would be classified as an asset because it is seen as a utility token and serves a similar function to that of Ethereum and when classified as an asset, generally, the rules of riba al buyu do not apply.

Conclusion

Cardano and ADA are the first blockchain and cryptocurrency backed by a scientific approach.

It’s a very well-thought-out third-generation blockchain project that incorporates very important improvements to the industry and that promises a lot for investors.

The main problem with Cardano is the slowness of its development. But this can also be seen as an advantage if in the end the promises made are kept and the platform works perfectly.

Again, do your research before investing, and in the end, Allah knows best.