🌰 Islamic Defi Can Be Game Changing When Done Right

Coin Telegraph did a magazine article recently on halal DeFi. They highlighted the fact that many Muslims and Jews avoid making money off of interest for religious reasons and discussed the ways DeFi can change the game for these individuals. While I appreciated the article’s insights, I feel like it buried the lead. The article begins with the clickbait idea that “maybe fiat was the real haram investment all along”, which actually isn’t the most mind-blowing opportunity crypto brings to interest-avoiding investors. The real groundbreaking opportunity here? Retirement.

What does it look like to be a retail investor in the United States that refuses to make money from interest? It’s not easy. Bonds are off the table, some folks will even donate the interest they earn on their checking or savings account. Especially as investors approach retirement age, the lack of low-risk, medium-reward options becomes a huge liability for interest-avoiding investors. How can you preserve your wealth without being able to earn money on interest?

That’s what makes crypto so game-changing. The ability to do market-making or mining– the ability to make money off of transaction fees, it opens up a plethora of halal medium-risk medium-reward shaped¹ investments to a group of people who’ve been denied such opportunities in the past.

The TAM here is huge, and designing a crypto checking account that earns you money via staking or liquidity pools etc etc is pretty straightforward compared to what it would take in fiat. Crypto companies have an opportunity here. An opportunity not all DeFi companies are interested in. I look forward to seeing who cracks the use-case first.

• Inspired by: DeFi can be halal but not DOGE Decentralizing Islamic finance
• Related to:
  • 🗨️ Origin and halal investing
  • [[DeFi can be halal but not DOGE Decentralizing Islamic finance]]

1. I cannot in good conscience currently describe anything crypto as low-risk, so for now I’m calling this category “medium-risk, medium-reward”. But the concept of making money off of transaction fees is a low-risk investment concept. If you were liquidity mining a eCNY/eUSD pair in the year 2050, it would likely feel like a low-risk medium-reward investment. ↩

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