Application of Islamic Commercial Contracts in Blockchain-Based Smart Contract

Abstract

One of the domains that is seeing a rapid transformation in its dimensions as a result of the proliferation of new technologies across the globe is finance. As a component of the conventional financial system, Islamic finance is required to keep pace with the development of technology to make the most of the opportunities presented by developing technologies in the process of bringing Shariah-compliant products that are suitable for Muslims in particular and for mankind in general. Musharakah, Mudarabah, and Murabahah are the three models that serve as the basis for the essential foundations of Islamic commercial law. Specifically, the Mudarabah, Musharakah, and Murabaha contracts are the ones that are investigated in this chapter as they pertain to the implementation of blockchain technology in Islamic commercial transactions. An introduction to blockchain and its various varieties, characteristics, and functions is presented at the beginning of the chapter. Following this, the chapter sheds light on the primary Islamic commercial contracts (mudarabah, musharakah, and murabahah) and their requirements, as well as their functioning, respectively. The chapter then moves on to its primary thesis, which is a comprehensive discussion of how blockchain technology can be used in the three Islamic commercial contracts that are being examined. The problems that Islamic finance specialists will need to overcome to properly incorporate blockchain technology in Islamic commercial contracts are discussed in the final section of the chapter.