My Halal Ratings for Wrapped Bitcoin, Polygon, Near Protocol, Cronos, and Dai!
I recently reviewed the top 15 cryptocurrencies (see 1-5, 6-10, 10-15) by Market Cap and revealed my comfort level in investing in them from a halal perspective.
While generally halal, I think a cryptocurrency can be haram if it is primarily used for haram purposes.
So I will be checking the utilities of these cryptocurrencies to determine my comfort level investing in them from a Halal perspective.
On this topic, When giving my halal ratings for cryptos and assets in general I don’t like to use the terms “Halal” and “Haram” in light of the tremendous responsibility entailed when using these words.
Instead, I use the terms: Comfortable, and Uncomfortable to represent my ratings and as a reminder to the listener that this is ultimately a judgment call that I am making which could be wrong so be sure to do your own due diligence.
You can find a full list of cryptocurrencies we’ve reviewed here.
Now without further adieu, let’s get started:
16. Wrapped Bitcoin (WBTC)
Wrapped Bitcoin is like the impossible burger. It may look like the real thing but it isn’t.
While Wrapped Bitcoin has the price of bitcoin and the word Bitcoin in its name, it is not Bitcoin.
So why the need for Wrapped Bitcoin?
The problem with Bitcoin for many holders is that it is not compatible with smart contracts.
It lives on its own blockchain and this blockchain has only very basic functionality by modern standards.
So if a holder of Bitcoin wants to use their Bitcoin for liquidity farming for example or to interact with a decentralized application they can’t on the local Bitcoin blockchain.
Enter Wrapped Bitcoin.
Wrapped Bitcoin is a tokenized version of Bitcoin (BTC) that runs on the Ethereum (ETH) blockchain.
It is backed by Bitcoin at a 1:1 ratio and is automatically minted or burned whenever users purchase or sell their wrapped Bitcoins for Bitcoin.
As someone who is comfortable investing in Bitcoin from a halal perspective, I see no problem with attempting to enable Bitcoin holders to use their holdings to interact with smart contracts and decentralized applications.
Is Wrapped Bitcoin Halal?
Therefore, I am comfortable investing in Wrapped Bitcoin from a halal perspective.
17. Polygon (MATIC)
Polygon aims to improve the speed and reduce the cost of transactions on Ethereum by processing these transactions outside the main Ethereum blockchain on a plethora of sidechains.
These sidechains can handle transactions for many decentralized applications at more attractive speeds and costs than what is available on the main Ethereum blockchain.
So Polygon is a layer-2 or add-on to the Ethereum blockchain.
Since I’m comfortable with Ethereum’s utility in terms of providing a platform for smart contracts and decentralized applications, I am by extension comfortable with technologies that enable Ethereum to provide its utility to end users quicker and cheaper which is what Polygon does.
Is Polygon Halal?
Therefore I am comfortable with Polygon from a halal perspective.
18. NEAR Protocol (NEAR)
NEAR Protocol is yet another layer-one blockchain solution to host decentralized applications.
Like other layer-1 blockchains such as Solana and Ethereum, Near made its own set of tradeoffs in terms of transaction speeds, throughput, and interoperability.
It has a specific focus on user-friendliness. For instance, NEAR uses human-readable account names, unlike the cryptographic wallet addresses common to Ethereum.
Compared to other layer-1 solutions, which I am generally comfortable with from a Halal perspective, NEAR differs in technical and design considerations, not ethical ones.
Is NEAR Protocol Halal?
Therefore, I am comfortable investing in Near from a halal perspective.
19. Cronos (CRO)
This token is the native token of Crypto.com and powers the full suite of services offered by Crypto.com.
Among these services are crypto collateralized loans, crypto.com visa card, and a derivates platform with leverage up to 100X
Similar to Binance coin, it seems to me that investing in Cronos is like buying equity in the financial services that crypto.com is offering since the more popular these services become, the higher the price of Cronos will become as well.
The problem with this is that these financial services seem to generate a material part of their revenue from activities that I am not comfortable with from a halal perspective and therefore I wouldn’t feel comfortable owning equity in them.
Is Cronos Halal?
Therefore I’m uncomfortable investing in this token from a halal perspective.
20. Dai (DAI)
DAI is an Ethereum-based algorithmic stable coin (stable-price cryptocurrency).
The price of Dai is pegged to the U.S. dollar and is collateralized by a mix of other cryptocurrencies.
Stablecoins are useful for exchanges, transfers, and savings.
I am generally uneasy about algorithmic stablecoins. Dai is even more suspect considering it is pegged to the dollar and backed by cryptocurrencies. So in my mind, the probability for this peg to the dollar to be disrupted is quite high.
I should also mention that the way Dai tokens are minted is through a ribawi loan, so I would not feel comfortable being involved in this process.
This does not mean that simply holding Dai tokens or using them in an exchange or transfer is necessarily haram since it is possible to do these things without having any interaction with a riba-based loan.
Is Dai Halal?
While I’m comfortable with Dai from a halal perspective, I don’t trust the reliability of its peg to the dollar so I would only use it for a quick transfer or exchange.
If you want to know which of these cryptos I like from an investment perspective, consider following my crypto and stock portfolios by becoming a PIF member, you also get access to privileged content, and a host of other perks by becoming a PIF member.
Disclaimer: Anything you read in this article is an opinion. It is not to be considered personalized financial advice. Make sure you do your due diligence before making any investment decisions.