Is bitcoin mining halal? – IslamicFinanceGuru

Bitcoin mining involves two key things:

1. You need to essentially be the auditor of the blockchain and verify that the payments being made are correct and there is no double-counting going on etc.
2. You need to participate in a race to discover the next 64-digit hexadecimal number to create the next block in the blockchain. You do this essentially through brute force computational power with the computer making millions of guesses until it strikes upon the right answer.

(1) is straightforwardly permissible.

(2) is also permissible in our view as the activity of racing with other miners with your computational power to “solve” this puzzle is intrinsically not haram. Yes there is an element of luck here, but it is mitigated by three important considerations:

1. You must be also acting as an auditor and providing a useful service. So the reward element is intrinsically tied up with doing something useful. There is also a value to the activity of engaging in mining and continuing on the blockchain. That is how bitcoin continues to flourish and function.
2. There is a clear component of calculation and computational power that is needed to engage in mining. So it isn’t as straightforward as gambling per se, or blind chance.
3. There is a predictability to mining with the difficulty of the mining kept constant so a new block is created every ten minutes and you can quite quickly mathematically assess your own chances of creating a block and getting some free bitcoins.

Of the three factors, (1) is the most important in our view.

As an aside, if we were to advise on the sharia compliance of the bitcoin structure before it was created, we would encourage the mining element of the cryptocurrency to be linked to some intrinsically useful activity that does not require so much computational power in a way that is beneficial to the world and is climate-friendly too in that it doesn’t eat up unnecessary resources.

This article is part of our Halal Cryptocurrency Guide.