Terms to know
Terms to know
A
Amanah In Islamic finance, Amanah refers to the concept of trustworthiness, honesty, and fulfilling fiduciary duties. It emphasizes the responsibility of financial institutions and individuals to act with integrity and prudence in managing funds and assets.
API (Application Programming Interface): In the blockchain and crypto space, an API is a set of protocols and tools that allow different software applications to communicate and interact with each other. APIs enable developers to access and utilize blockchain functionalities, such as retrieving data, executing transactions, and integrating blockchain technology into their applications.
ASIC (Application-Specific Integrated Circuit): In the context of crypto mining, an ASIC refers to specialized hardware designed specifically for mining cryptocurrencies. ASIC miners are tailored for maximum efficiency and performance in solving the computational puzzles required to mine blocks in certain cryptocurrencies.
Atomic Swap An atomic swap is a peer-to-peer exchange of cryptocurrencies directly between two parties without the need for intermediaries or centralized exchanges. It enables the instant and secure swapping of different cryptocurrencies, often based on smart contracts and utilizing cryptographic hash functions.
Auditability It refers to the transparency and ability to trace and verify every transaction and data entry on the blockchain. The decentralized nature of blockchain allows anyone to audit and verify the authenticity, integrity, and accuracy of the recorded information, providing increased trust and accountability.
Altcoin In the crypto world, an altcoin refers to any cryptocurrency other than Bitcoin. The term “alt” stands for “alternative,” indicating that these coins are alternatives to Bitcoin. Altcoins may have their own unique features, use cases, and underlying technologies.
B
Baitul-Mal In Islamic finance, Baitul-Mal refers to the treasury or public fund in a Muslim community or state. It is used to collect and distribute charitable donations, zakat (obligatory alms), and other funds for the welfare of the community, supporting social and economic development.
Barakah In Islamic finance, Barakah refers to the concept of divine blessings and prosperity that can be obtained through halal (permissible) means. It emphasizes conducting financial activities in accordance with Shariah principles to attract divine blessings and ensure long-term success.
Blockchain A decentralized and distributed digital ledger that records transactions across multiple computers in a transparent and secure manner.
Blockchain-as-a-Service (BaaS) Blockchain-as-a-Service refers to cloud-based services that allow businesses and individuals to develop, deploy, and manage blockchain applications without the need to set up and maintain their own blockchain infrastructure. BaaS providers offer pre-configured blockchain networks and tools, enabling easier adoption of blockchain technology for various purposes.
Block Explorer A tool or website that allows users to explore and view details about transactions, blocks, addresses, and other information on a blockchain.
Bull Market A bull market refers to a financial market characterized by rising prices and positive investor sentiment. In the context of crypto, it indicates an upward trend in cryptocurrency prices, with increased buying activity and overall optimism in the market.
Burn In the crypto space, “burn” refers to the deliberate and permanent removal of a certain amount of cryptocurrency tokens or coins from circulation. Burning tokens reduces the total supply, which can potentially increase the value of the remaining tokens by creating scarcity and improving tokenomics.
C
Compliance Compliance refers to adhering to regulatory and legal requirements set forth by governing authorities. In the context of crypto, blockchain, and Islamic finance, compliance ensures that activities, transactions, and financial operations are conducted in accordance with relevant laws, regulations, and ethical guidelines.
Consensus Mechanism The algorithm or protocol used in a blockchain network to achieve agreement among participants on the validity of transactions and the state of the ledger.
Cryptocurrency: Digital or virtual currencies that use cryptography for secure financial transactions.
Cryptography The practice of secure communication in the presence of third parties, involving encryption and decryption techniques used to protect data on the blockchain.
Cross-Chain Compatibility The ability of different blockchain networks to interact and exchange assets or data seamlessly, enabling interoperability between disparate blockchain ecosystems.
Crowdfunding Crowdfunding is a method of raising funds for a project or venture by collecting small contributions from a large number of people, often facilitated through online platforms. In the crypto space, crowdfunding campaigns can be conducted through initial coin offerings (ICOs) or token sales to raise capital for blockchain projects.
D
Decentralization The characteristic of a blockchain network where no single entity or central authority has full control over the network, making it more resistant to censorship and single points of failure.
Decentralized Application (DApp) A decentralized application, or DApp, is an application built on a blockchain network that operates using smart contracts and runs on a peer-to-peer network of computers. DApps aim to provide secure, transparent, and trustless solutions, offering a range of functionalities such as finance, gaming, identity management, and more.
Decentralized Autonomous Organization (DAO) An organization governed by smart contracts and operated by its community members, allowing for decentralized decision-making and management.
Decentralized Finance (DeFi) An ecosystem of decentralized financial applications and protocols built on blockchain, aiming to provide open and permissionless financial services.
Digital Identity Digital identity refers to the unique representation of an individual or entity in the digital world. In the context of blockchain, digital identity solutions aim to provide secure and verifiable identity management systems, allowing users to maintain control over their personal data while ensuring privacy and preventing identity fraud.
Distributed Ledger Technology (DLT) The broader term encompassing blockchain technology, referring to the decentralized and distributed nature of the ledger used to record transactions.
E
Emission In the context of cryptocurrencies, emission refers to the process of generating or creating new units of a particular cryptocurrency. Emission can occur through various mechanisms, such as mining, staking, or a predetermined issuance schedule. It determines the rate at which new coins or tokens enter circulation and affects the overall supply dynamics of the cryptocurrency.
Equity Token An equity token represents ownership or shares in a company or asset. In the context of blockchain, equity tokens are digitized assets that can be issued and traded on blockchain platforms. They enable fractional ownership, providing investors with the opportunity to hold and trade shares of a company or asset in a transparent and efficient manner.
ERC-20 ERC-20 is a technical standard for creating and implementing tokens on the Ethereum blockchain. It defines a set of rules and functionalities that enable developers to create fungible tokens, which are interchangeable and represent digital assets or utility within decentralized applications (DApps) built on the Ethereum platform.
Ethical Finance Ethical finance refers to financial practices that align with ethical and moral principles, promoting responsible and socially conscious investments. In Islamic finance, ethical finance is a fundamental aspect, as it focuses on conducting financial activities in accordance with Shariah principles, which include avoiding investments in industries like gambling, alcohol, and tobacco.
Exchange-Traded Product (ETP) An Exchange-Traded Product (ETP) is a financial instrument that tracks the price movements of an underlying asset or index. In the crypto space, there are cryptocurrency ETPs that allow investors to gain exposure to digital assets without directly owning them. These ETPs are traded on regulated exchanges and offer a convenient way to invest in cryptocurrencies within traditional investment frameworks.
Exchanges Exchanges are platforms where cryptocurrencies and other digital assets can be bought, sold, and traded. Crypto exchanges facilitate the conversion of one cryptocurrency to another or the exchange of cryptocurrencies for fiat currencies. They provide liquidity, price discovery, and a marketplace for individuals and institutions to engage in cryptocurrency trading.
F
Fatwa A fatwa is a legal opinion or ruling provided by Islamic scholars on matters related to Islamic law (Shariah). In Islamic finance, fatwas play a crucial role in determining the permissibility or compliance of financial activities, products, and contracts with Islamic principles, ensuring ethical and religious adherence in financial transactions.
Fiat Currency Fiat currency refers to traditional, government-issued currencies that are not backed by a physical commodity like gold or silver. Examples include the US Dollar (USD), Euro (EUR), or British Pound (GBP). In the context of crypto, fiat currency is often contrasted with cryptocurrencies, which are decentralized digital currencies.
Financial Inclusion Financial inclusion refers to the accessibility and availability of financial services and products to individuals and communities, including those who are unbanked or underserved. In the context of crypto, blockchain, and Islamic finance, financial inclusion efforts aim to provide equal access to financial services, promote economic empowerment, and bridge the gap in financial services for marginalized populations.
FinTech FinTech, short for Financial Technology, refers to the application of technology in financial services to enhance efficiency, accessibility, and innovation. In the context of crypto, blockchain, and Islamic finance, FinTech plays a crucial role in driving advancements in digital payments, decentralized finance, Islamic banking solutions, and other financial technology applications.
Fork A divergence in the blockchain, resulting in two separate paths or versions of the blockchain due to a change in protocol or disagreement among network participants.
Fungibility Fungibility refers to the interchangeability and uniformity of a particular asset or currency. Fungible assets or currencies can be exchanged on a one-to-one basis as they are considered identical and of equal value. In the context of cryptocurrencies, fungibility is important as it ensures that each unit of a cryptocurrency is indistinguishable from another and can be freely exchanged.
G
Gas A unit of measurement on blockchain networks, representing the computational effort required to execute a transaction or smart contract. It determines the fees for transaction processing.
Gharar Excessive uncertainty or ambiguity in a transaction that may lead to exploitation, and thus is prohibited in Islamic finance.
Gold-backed Cryptocurrency A gold-backed cryptocurrency is a type of digital asset that is backed by physical gold reserves. These cryptocurrencies aim to provide the benefits of both digital currencies and the stability and value associated with gold. Each unit of the cryptocurrency represents a certain amount of gold held in storage.
Governance Governance refers to the processes and structures through which decisions are made and authority is exercised within organizations, networks, or communities. In the context of blockchain, governance mechanisms are designed to enable stakeholders to participate in decision-making processes related to protocol upgrades, consensus rules, and network governance.
H
Hajj Savings Hajj savings refers to specific financial products or schemes designed to help Muslims save money for the purpose of performing the Hajj pilgrimage, one of the Five Pillars of Islam. Islamic financial institutions offer Hajj savings accounts that comply with Shariah principles, allowing individuals to set aside funds in a halal manner to fulfill their religious obligations.
Halal Permissible or lawful according to Islamic principles, ensuring compliance with ethical and religious guidelines.
Halal Cryptocurrency Halal cryptocurrency refers to a digital currency that is compliant with Islamic principles and permissible under Shariah law. Halal cryptocurrencies are designed to adhere to Islamic finance principles, ensuring that they meet the criteria of being free from interest (riba), gambling (maysir), and uncertainty (gharar).
Hard Cap Hard cap refers to the maximum limit or cap imposed on the total supply or issuance of a cryptocurrency. It represents the maximum number of coins or tokens that can ever be created or circulated. The hard cap provides a predetermined limit to the supply, which can impact factors such as scarcity, inflation, and long-term value.
I
Ijarah A leasing contract commonly used in Islamic finance, where the lessor transfers the right to use an asset to the lessee for a specified period in exchange for rental payments.
Immutable Once a transaction or data is recorded on the blockchain, it cannot be altered or tampered with, ensuring transparency and auditability.
Interoperability The ability of different blockchain networks to communicate and interact with each other, facilitating seamless data and asset transfer between networks.
Islamic Banking Banking practices that adhere to the principles of Shariah, such as avoiding interest-based transactions and promoting ethical and responsible financial practices.
Islamic Fund Management The management of investment funds that comply with Shariah principles, ensuring investments are made in halal and ethical assets.
Islamic Microfinance Financial services tailored to low-income individuals and microenterprises, adhering to Islamic principles of fairness and social responsibility.
Istisna’a A contract in Islamic finance used for financing construction projects or manufacturing goods, where one party agrees to deliver a specified product upon completion.
J
Joint Venture A joint venture is a business arrangement in which two or more parties come together to undertake a specific project or enterprise.
Juristic Opinion Juristic opinion refers to the legal opinion provided by Islamic scholars (muftis) on matters related to Islamic law (Shariah). In the context of Islamic finance, juristic opinions play a significant role in determining the permissibility or compliance of financial activities, products, contracts, and investment strategies with Islamic principles.
Juristic Person Juristic person refers to a legal entity recognized by law that can own assets, enter into contracts, and engage in legal activities. In the context of crypto and blockchain, juristic persons can be organizations, companies, or institutions that participate in blockchain networks, develop blockchain-based solutions, or engage in cryptocurrency-related activities.
K
Kashf Kashf, in Islamic finance, refers to disclosure or transparency. It emphasizes the importance of providing clear and transparent information about financial products, contracts, risks, and terms to enable informed decision-making in accordance with Islamic principles. Kashf promotes transparency, fairness, and accountability in financial transactions.
Key Derivation Function (KDF) A Key Derivation Function is a cryptographic function used to derive one or more cryptographic keys from a given input, such as a master key or password. KDFs play a vital role in key management, ensuring that keys are generated securely and are resistant to attacks.
Key Management Key management involves the secure generation, storage, and usage of cryptographic keys in blockchain and crypto systems. It encompasses practices and protocols for key generation, distribution, rotation, and protection to ensure the confidentiality, integrity, and availability of cryptographic keys.
Key Pair In cryptography and blockchain, a key pair consists of two cryptographic keys: a public key and a private key. The public key is used for encryption and can be openly shared, while the private key is kept secret and used for decryption or digital signatures. Key pairs play a crucial role in securing digital assets, verifying transactions, and providing user authentication.
Know Your Customer (KYC) Know Your Customer, commonly known as KYC, is a process implemented by financial institutions and cryptocurrency exchanges to verify the identity of their customers. KYC procedures require individuals to provide identification documents and other relevant information to ensure compliance with regulations, prevent fraud, and enhance security.
L
Layer 2 Scaling Layer 2 scaling refers to solutions built on top of existing blockchain networks to enhance scalability and improve transaction throughput. These solutions aim to alleviate network congestion and high fees by offloading some transaction processing to secondary layers, while still ensuring the security and integrity of the underlying blockchain.
Leverage Leverage, in the context of trading and investing, refers to the use of borrowed funds or margin to amplify potential returns. It allows traders to control larger positions with a smaller amount of capital. However, leverage also increases the risk of losses, as losses can exceed the initial investment.
Limit Order A limit order is a type of order placed by a trader to buy or sell a cryptocurrency or financial asset at a specified price or better. It allows traders to set their desired price for executing a trade, ensuring they enter or exit the market at a specific price level.
Liquidity Liquidity refers to the ease with which an asset or security can be bought or sold in the market without causing significant price fluctuations. In the context of crypto and financial markets, liquidity is an important factor that affects trading volumes, price stability, and market efficiency.
Liquidity Pool A liquidity pool is a pool of funds provided by liquidity providers to facilitate trading on decentralized exchanges (DEXs). Liquidity pools allow users to trade cryptocurrencies without relying on traditional order books. Liquidity providers earn fees based on their contribution to the pool, and traders can execute trades more efficiently.
M
Maqasid al-Shariah The higher objectives and goals of Shariah, which include the preservation of religion, life, intellect, wealth, and lineage, as well as promoting justice and social welfare.
Mining The process of validating and adding new transactions to the blockchain by solving complex mathematical problems, typically associated with proof-of-work consensus mechanisms.
Mudarabah A profit-sharing partnership arrangement where one party provides capital (rabb al-mal) while the other party manages the business (mudarib).
Musharakah A partnership-based financing contract where all parties contribute capital and share profits and losses in proportion to their investments.
Murabaha A type of Islamic financing arrangement involving the sale of goods with a deferred payment structure, often used in asset financing.
N
Netting Netting refers to the process of offsetting or settling multiple financial obligations or positions between parties to determine the net amount payable or receivable. In Islamic finance, netting arrangements should comply with Shariah principles, ensuring that transactions are free from interest (riba) and based on fair and equitable principles.
Node A participant in a blockchain network that maintains a copy of the entire blockchain and validates transactions, contributing to the consensus process.
Non-Fungible Token (NFT) A type of digital asset that represents ownership or proof of authenticity of a unique item or piece of content, such as art, collectibles, or virtual real estate.
O
Open Source Open source refers to software or projects that are publicly accessible and allow users to view, modify, and distribute the source code. Open source projects promote transparency, collaboration, and community-driven development. Many blockchain platforms and cryptocurrencies are built on open source principles, enabling peer review and innovation.
Options Contract An options contract is a financial derivative that provides the buyer with the right, but not the obligation, to buy (call option) or sell (put option) an underlying asset at a predetermined price within a specified period. Options contracts are used for hedging, speculation, and risk management in various financial markets, including cryptocurrency derivatives markets.
Over-the-Counter (OTC) Over-the-counter refers to the trading of financial instruments directly between two parties outside of traditional exchanges. In the context of crypto, OTC trading involves the buying and selling of cryptocurrencies directly between buyers and sellers, typically in large volumes. OTC trading allows for increased privacy, customized transactions, and liquidity for certain cryptocurrencies.
P
Peer-to-Peer (P2P) Peer-to-Peer refers to a decentralized model of interaction or communication between parties without the need for intermediaries. In the context of crypto and blockchain, P2P networks allow direct transactions, data sharing, and communication between participants, enhancing efficiency, transparency, and security.
Private Blockchain A blockchain network that restricts participation and requires permission to join, typically used by organizations or consortia for specific purposes.
Private Key In cryptography and blockchain, a private key is a randomly generated secret number that is used to sign transactions and access digital assets. It is kept confidential by the owner and acts as a personal identifier or proof of ownership. A private key is essential for securing cryptocurrency holdings and conducting secure transactions.
Profit and Loss Sharing (PLS) Profit and Loss Sharing is a fundamental principle in Islamic finance that emphasizes the equitable sharing of profits and losses between parties involved in a financial transaction or partnership. PLS contracts, such as Mudarabah and Musharakah, promote risk-sharing and ethical financial practices aligned with Shariah principles.
Proof of Stake (PoS) Proof of Stake is a consensus mechanism used in blockchain networks to validate and secure transactions. It relies on participants holding a certain amount of cryptocurrency and “staking” their coins as collateral to become validators and create new blocks. Proof of Stake is considered an energy-efficient alternative to Proof of Work (PoW) consensus.
Public Blockchain A blockchain network that is open to anyone and allows for public participation, transparency, and validation of transactions by multiple participants.
Q
Qard al-Hasan An interest-free loan given for charitable or benevolent purposes, with the borrower obligated to repay only the principal amount.
Qualified Custodian A qualified custodian is an entity or institution that holds and safeguards financial assets on behalf of clients, meeting specific regulatory requirements. In the context of cryptocurrencies and digital assets, qualified custodians play a crucial role in securely storing and managing digital assets to ensure their integrity and protect against theft or loss.
QR Code QR (Quick Response) code is a two-dimensional barcode that can store information such as website links, text, or contact details. In the context of crypto and blockchain, QR codes are commonly used to facilitate quick and secure transactions by scanning the code with a mobile device or digital wallet.
Quorum Quorum is an enterprise-grade blockchain platform built on the Ethereum protocol. It is specifically designed for private or permissioned networks and offers enhanced privacy and performance features. Quorum is often utilized in industries such as finance, supply chain, and healthcare, where privacy and scalability are critical.
R
Rahn A pledge or collateral arrangement in Islamic finance, allowing for the provision of loans secured by pledged assets
Regulation Regulation refers to the set of rules, laws, and guidelines established by governmental authorities or regulatory bodies to govern various aspects of financial markets and activities. In the context of crypto, blockchain, and Islamic finance, regulations play a crucial role in ensuring market integrity, consumer protection, and compliance with ethical and legal standards.
Return on Investment (ROI) Return on Investment is a financial metric used to evaluate the profitability or performance of an investment. It measures the gain or loss generated relative to the amount invested, usually expressed as a percentage. ROI is an important factor in assessing the effectiveness and profitability of investment opportunities.
Riba: Prohibited interest or usury in Islamic finance, as it goes against the principle of fairness and risk-sharing.
Ribawi Goods Ribawi goods are specific categories of goods mentioned in Islamic finance that are subject to certain conditions and restrictions. These goods include gold, silver, dates, wheat, barley, and salt. Transactions involving Ribawi goods may require adherence to specific rules and conditions prescribed by Islamic law (Shariah).
Risk Management Risk management involves identifying, assessing, and mitigating potential risks to minimize the negative impact on an organization or investment. In the context of crypto, blockchain, and Islamic finance, risk management practices are crucial for ensuring compliance, protecting assets, and making informed decisions.
S
Scalability The capability of a blockchain network to handle an increasing number of transactions or users without compromising its performance or security.
Shariah The Islamic law derived from the Quran and the Sunnah, guiding Muslims in their religious, social, and financial matters.
Smart Contracts Self-executing contracts with terms and conditions written into code, automatically executing actions when predefined conditions are met.
Sukuk Islamic financial instruments similar to bonds, representing ownership in an underlying asset, project, or investment in compliance with Shariah principles.
Sukuk Al-Istisna A type of sukuk that represents ownership in a construction project, where investors provide funds to finance the project’s development.
T
Takaful Islamic insurance based on the principle of mutual cooperation, where participants contribute to a fund that provides protection against specified risks.
Taqwa Taqwa is an Arabic term used in Islamic finance and ethics, which refers to being conscious of and fearing God. In the context of Islamic finance, Taqwa emphasizes the importance of adhering to ethical and moral principles, honesty, and integrity in financial transactions.
Tawarruq A financing structure in Islamic finance where a commodity is purchased by a party on credit and then immediately sold to a third party for cash.
Technical Analysis Technical analysis is a method used to forecast the future price movements of financial assets, including cryptocurrencies. It involves analyzing historical price data, market trends, and chart patterns to make predictions about future price movements. Technical analysis plays a significant role in trading strategies and investment decision-making.
Token Standards Protocol specifications that define the rules and functionalities of tokens on a blockchain, such as ERC-20, ERC-721, and BEP-20.
Tokenization The process of converting real-world assets or rights into digital tokens on a blockchain, enabling fractional ownership, increased liquidity, and transparency.
Transaction Fee A transaction fee, also known as a network fee or gas fee in blockchain networks, is a fee paid by users to execute transactions on the network. Transaction fees help incentivize network validators and miners, ensuring the security and efficiency of blockchain networks.
U
Unbanked The term “unbanked” refers to individuals or communities who do not have access to traditional banking services. In the context of crypto and blockchain, unbanked populations can potentially benefit from decentralized financial solutions that provide them with access to financial services, such as digital wallets and peer-to-peer transactions.
Utility Function Utility function is an economic concept that quantifies the satisfaction or value individuals derive from consuming goods or services. In Islamic finance, the concept of utility function considers not only monetary returns but also the broader social benefits and adherence to ethical principles in evaluating investment decisions.
V
Value at Risk (VaR) Value at Risk is a risk management technique used to estimate the potential loss or downside risk of an investment or portfolio over a specific time horizon. VaR helps investors and financial institutions assess and manage their exposure to market fluctuations and potential losses.
Value Proposition Value proposition refers to the unique benefits or value that a product, service, or project offers to its users or customers. In the context of crypto and blockchain, a strong value proposition is essential for attracting users, investors, and stakeholders, as it highlights the distinctive features and advantages of a particular offering.
Venture Capital Venture capital refers to a form of private equity financing provided to early-stage, high-potential companies with growth prospects. In the context of crypto and blockchain, venture capital firms often invest in startups and projects that are developing innovative blockchain solutions, decentralized applications, or crypto-related services.
Verification Verification is the process of confirming the accuracy, authenticity, or validity of information or transactions. In the context of blockchain, verification involves validating and confirming the integrity of transactions and data through cryptographic algorithms and consensus mechanisms.
Virtual Currency Virtual currency refers to digital representations of value that are used as a medium of exchange. Cryptocurrencies, such as Bitcoin and Ethereum, are examples of virtual currencies. Virtual currencies operate independently of traditional banking systems and are typically based on decentralized blockchain technology.
Volatility Volatility refers to the degree of price fluctuations or variability of an asset or market over a given period. In the context of cryptocurrencies, volatility is a characteristic often associated with price movements, as crypto markets can experience rapid and significant price changes within short periods of time.
W
Wa’d A promise or contract in Islamic finance that allows for future transactions based on specified terms and conditions.
Wakalah A contract in Islamic finance that delegates the authority to act on behalf of someone else for specific financial transactions, typically involving an agency relationship.
Wallet A software or hardware device that stores private keys and enables users to securely store, send, and receive cryptocurrencies.
Waqf A charitable endowment or trust established for religious, educational, or social purposes in accordance with Islamic principles.
Z
Zakat Obligatory charitable giving in Islam, typically calculated as a percentage of one’s wealth and distributed to those in need.
Zero-Knowledge Proof Zero-Knowledge Proof (ZKP) is a cryptographic protocol that allows one party (the prover) to prove to another party (the verifier) that a statement is true without revealing any additional information. In the context of blockchain and cryptocurrency, zero-knowledge proofs are used to enhance privacy and confidentiality while still validating the integrity and accuracy of transactions.
