Shariah Oracle – an on-chain registry of Halal Certificates

Introduction

The Shariah Oracle is an on-chain registry of Halal Certificates. It serves as an on-chain mechanism controlling a whitelist of smart contracts allowing for interaction (signing and listing in the in-app marketplace) through the HAQQ Wallet. The Shariah Oracle not only ensures that users interact only with whitelisted, Sharia-compliant dApps, but it also provides smart contract developers and web2 businesses a way to prove their ethical relevance to Muslim users by listing their products and services on the HAQQ Wallet.

Understanding Oracles and Their Role

Smart contracts, an essential feature of decentralized applications (dApps), enable automated execution without the need for intermediaries. However, they cannot access external information sources, creating a gap between on-chain and off-chain worlds. To bridge this gap, oracles, such as the Shariah Oracle, retrieve and reconcile data from various sources, making it available to smart contracts. They retrieve data through several methods, including:

API Calls: An Oracle can retrieve data from external APIs, such as weather APIs, market data APIs, and social media APIs.
Distributed Ledger Oracles: An Oracle can retrieve data from other blockchain networks, such as Bitcoin or Ethereum.
Consensus-Based Oracles: Oracles can retrieve data from multiple sources and use consensus algorithms to validate the accuracy of the data. This approach ensures that the data fed to the smart contract is reliable and trustworthy.
Trusted Data Sources: Oracles can retrieve data from trusted data sources, such as data feeds provided by reputable companies or organizations.

The Shariah Oracle and its Purpose

The Shariah Oracle serves as a critical measure to minimize unethical or Haram activity in the HAQQ network. By integrating the Shariah Oracle with the HAQQ Wallet, only whitelisted, Sharia-compliant dApps are accessible to users. This unique feature enables developers to demonstrate their ethical relevance to Muslim users and to list their products or services on the HAQQ Wallet, thus increasing their chances of adoption and success.

How Does the Shariah Oracle Work?

The Shariah Oracle operates on two levels of approval: Community approval and Shariah board approval. Community approval is granted by ISLM stakers, enabling the project to be listed in the HAQQ Wallet Marketplace. The Shariah Board gives Shariah Approval, allowing projects to receive a Shariah Compliant label in the marketplace. The Shariah Oracle also has a warning feature that alerts users when they attempt to sign any transaction on non-community-approved contracts, thus enhancing the security of the HAQQ Network.

Maintaining Decentralization in the Shariah Oracle

Despite the additional feature of Shariah Compliance, the HAQQ Network doesn't impose centralization. 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.

Value Proposition of the Shariah Oracle

The Shariah Oracle offers a significant value proposition by ensuring that all smart contracts interacting with the HAQQ Wallet are Shariah-compliant, thus adhering to Islamic principles and ethics. This feature benefits Muslim users and ESG-driven investors who prioritize ethical investing practices. Additionally, it helps to mitigate common front-end attacks, enhancing the security of the HAQQ Network.

Technical Architecture of the Shariah Oracle

The Shariah Oracle operates through a series of steps at both the community and Shariah Board approval levels. From proposal submission, voting, whitelisting (or SBT issuance) to Shariah board approval and possible revoking of approval, the process is designed to be transparent, secure, and efficient.

Community Approval Process:

Proposal submission: An $ISLM staker submits a proposal for community approval via gov module
Deposit: Proposals must be submitted with a minimum deposit to prevent spam.
Vote: Community participants vote on the proposal.
Whitelist (SBT issuance): Once approval is done, SBT is issued over a smart contract.

Shariah Approval Process:

Proposal submission: An SBT token holder can submit a proposal for Shariah approval for ONLY a community-approved smart contract.
Deposit: Proposals must be submitted, which serve as audit fees for the board or authorized auditors. Hence it is non-refundable.
Shariah Board approval: After the community approves a smart contract, the Shariah Board conducts an audit and provides feedback. The project team implements the feedback, and the board conducts a final review, either approving or rejecting the smart contract for Shariah compliance. No community vote is required for this process.

Revoking Shariah approval

If a project marked as Shariah-compliant deviates from the prescribed guidelines, it is flagged and provided a grace period of three to six months to rectify the issues. During this time, any HAQQ community member who chooses to engage with the associated contract will receive a warning notification that the project is not approved. Suppose the grace period expires without the necessary corrections made by the project. In that case, the HAQQ Network will impose restrictions, preventing HAQQ wallet users from accessing such contracts only if the user has set Shariah approval as his preference. However, these contracts can still be interacted with via Metamask or any other EVM-compatible wallet.

Integration of AI for Compliance Checks

This collaboration integrates SingularityNET's AI acumen with HAQQ's financial principles, simplifying AI integration. By connecting the Singularity Registry with the HAQQ Oracle, users have streamlined access to AI services aligning with ethical and Islamic Finance guidelines. The Shariah Oracle now includes a machine learning module developed in collaboration with SingularityNET. This module specifically employs a Decision Tree algorithm to analyze smart contracts against a dataset of known Shariah compliance criteria. After ingesting the smart contract's bytecode and ABI (Application Binary Interface), the algorithm returns a compliance score between 0 and 1, then logged on-chain. This score serves as a preliminary filtering mechanism: contracts that score above a predetermined threshold (e.g., 0.8) proceed to human-led Shariah Board reviews, while those below are flagged for further scrutiny or outright rejection. This automated first step speeds up the process minimizes human error, and allows the Shariah Board to focus on borderline or complex cases. All machine learning operations are executed in a sandboxed environment within the Oracle, ensuring both the integrity of the data and the security of the HAQQ Network.

Future Developments

The Shariah Oracle seeks to enhance its processes by implementing authorized Shariah auditors in the future. This plan aims to streamline the audit process, promote decentralization, and avoid bottlenecks. The Shariah Oracle is expected to go live in Q3 2023.

Conclusion

The Shariah Oracle is an innovative blend of blockchain technology, Islamic principles, and ethical investing standards. By ensuring only Shariah-compliant dApps are accessible via the HAQQ Wallet, it offers ethical compliance in the rapidly evolving digital finance ecosystem. Its unique two-tier approval system bridges the gap between technology and tradition, fortifying the network's security while preserving decentralization—a cornerstone of blockchain systems.

Looking ahead, the introduction of authorized Shariah auditors will further streamline the compliance process, promoting a robust, inclusive, and regulated ecosystem. Set to go live in Q3 2023, the Shariah Oracle stands as a significant milestone at the intersection of modern finance and faith-based ethics, laying the foundation for a more equitable and sustainable financial future.

Sign up for HAQQ updates