Shariah Oracle — an on-chain registry of Halal Certificates Islamic Coin
Shariah Oracle is an on-chain mechanism controlling a whitelist of smart contracts allowed for interaction (signing and listing in the in-app marketplace) through the HAQQ Wallet.
The Shariah Oracle serves as an on-chain registry of Halal Certificates that provides smart contract developers and web2 businesses a way to prove their ethical relevance for Muslim users by listing their products/services on the HAQQ Wallet.
Integrating the Shariah Oracle with HAQQ Wallet will ensure that users interact only with whitelisted, Sharia-compliant dApps. Thus whilst being a place where anyone can deploy their dApp or project, HAQQ network’s Shariah Oracle is a key measure to minimize unethical or Haram activity in our network.
Purpose
- Why Shariah Oracle?
Ethical protection
- What is the value proposition?
Halal Certification and its Importance for Muslim Users and ESG-driven Investors
The HAQQ Network’s Shariah Oracle is an excellent example of how blockchain oracles can be utilized to create a more ethical and sustainable financial system. The Shariah Oracle ensures that all smart contracts that interact with the HAQQ Wallet are Shariah-compliant, which means they adhere to Islamic principles and ethics. This feature is essential for Muslims and ESG-driven investors who prioritize ethical investing practices.
The Shariah Oracle’s mechanism of community and Shariah Board approval ensures that only Shariah-compliant smart contracts are whitelisted on the HAQQ Wallet. This feature benefits HAQQ ecosystem investors and users by providing a transparent, secure, and Shariah-compliant environment for investment. It also helps to mitigate common front-end attacks, making it harder for hackers to hijack smart contracts and manipulate data. For instance, if a user tries to interact with a non-whitelisted contract on the Sharia Oracle level, the user gets a warning message.
Additionally, other smart contracts can integrate with the Shariah Oracle as well.
Since both community and Shariah approvals are Soulbound tokens (SBTs), smart contracts like Decentralized Exchanges (DEXes) can quickly check whether the ERC-20 token sent to them as liquidity is Shariah/community approved or not — and decide whether to accept it or not. This seamless integration allows for increased compliance and security within the HAQQ ecosystem, ensuring that all participants adhere to Shariah principles and maintain a reliable environment for investment.
How It Works ?
The Shariah Oracle will be implemented on top of the Layer 1 governance and has two levels of approval: Community approval and Shariah board approval.
Community level approval
Community approval is granted by the ISLM stakers. It grants the right for the project to be listed in HAQQ Wallet Marketplace, and users can interact with such a contract without warning IF they selected community approval as the preferred level of approval. In order for a smart contract to be whitelisted, the author or project community should submit a governance proposal to whitelist a smart contract. Then ISLM stakers vote for or against this proposal. If the community accepts a proposal, the smart contract gets whitelisted on HAQQ Wallet but doesn’t get the Shariah-compliance mark. Additionally, the community approval ensures that users of the HAQQ Wallet also get a warning notification if they attempt to sign any transaction on non-community-approved contracts.
This warning feature ensures that users only interact with verified smart contracts, reducing the potential for fraudulent activities and enhancing the security of the HAQQ Network. An example of the importance of this warning feature is the recent frontend attack on the stablecoin AMM exchange, Curve, where hackers were able to hijack a portion of the frontend code to redirect user funds to their wallet. A warning system like the HAQQ Wallet would easily forestall this kind of attack as users would have been alerted when interacting with the hijacked code, preventing the inadvertent transfer of funds to malicious contracts.
Another key feature of the community-approved projects is that once approved, they are highlighted and showcased by getting listed on the in-app marketplace within the HAQQ Wallet. This allows developers to showcase their projects to a broader audience, thereby increasing their chances of adoption and success.
Shariah Board approval
Shariah Approval is given by Shariah Board. It grants projects Shariah Compliant label in the marketplace, and users can interact with such contracts without warning regardless of the preferred level of approval. For an explicit shariah-compliance mark, a community- approved project will have to submit a proposal alongside a deposit for review by the Shariah Board. The deposit is a board services fee that goes directly to scholars. If accepted, it gains an explicit shariah-compliance checkmark.
The Shariah Board reserves the right to revoke its endorsement for approved contracts should the projects exhibit non-compliant behavior at any point. In such cases, users can still interact with the smart contract. Still, the HAQQ Wallet will display a conspicuous warning when attempting to sign a transaction involving a non-Shariah-compliant smart contract. This precaution is necessary as users may still have funds locked within the smart contract.
Initially, audits are conducted exclusively by our Shariah board. However, to avoid creating a bottleneck and to promote decentralization, we plan to implement authorized Shariah auditors in the future. By empowering our board to authorize other auditors to conduct compliance audits, we aim to streamline the process and ensure a more decentralized approach.
How does the Shariah Oracle maintain decentralization?
It is important to clarify that the Shariah Compliance feature does not impose centralization on the HAQQ network. Instead, the Shariah Oracle influences only the HAQQ Wallet behavior and not any other aspect of the HAQQ network or Layer 1. As a result, users not concerned about Shariah compliance can still interact with any smart contract deployed on the HAQQ Network via Metamask or any other EVM-compatible wallet.
Additionally, even with the HAQQ wallet, users can interact with any smart contract by confirming transactions through a warning pop-up, ensuring that they are aware of any potential non-compliant transactions.
NOTE:
If a user interacts with smart contracts without community or Shariah approval, then:
- If his preferred level of approval is the Community, he gets a warning that the project has got neither community approval nor Shariah approval **yet*
- If his preferred level of approval is Shariah, he gets a warning that the project has not got Shariah approval yet
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