In blockchain technology, "Zakah Contract" is a smart contract-based mechanism designed to automate and manage the Zakat obligation in Islam. Zakat is one of the five pillars of Islam, requiring eligible Muslims to donate a certain percentage of their wealth (usually 2.5%) to those in need every year. Blockchain technology digitizes this traditional religious obligation through smart contracts, making it more transparent, efficient and verifiable.
The core mechanism of Zakah Contract
1. Automated calculation and payment:
- Smart contracts can be connected to the user’s cryptocurrency wallet or on-chain assets (such as stablecoins, gold tokens, etc.), calculate their net worth (the portion above the Nisab threshold) in real time, and automatically trigger the payment of Zakat (2.5%).
- For example, if a user holds assets worth more than Nisab (equivalent to approximately 87 grams of gold), the contract will deduct Zakat according to the rules.
2. Asset Verification and Compliance:
- The transparency of blockchain allows for public verification of whether an asset qualifies for Zakat (e.g. held for a full year, non-liability assets, etc.).
- Some projects may integrate oracles to obtain external data such as gold prices to ensure the accuracy of Nisab thresholds.
3. Decentralized distribution:
- Zakat funds are automatically distributed to predefined eligible recipients (such as the poor, debtors, etc.) through smart contracts, and the distribution process is recorded on the chain to avoid human intervention or corruption.
- The identity of the recipient can be verified through a decentralized identity (DID) system to ensure compliance with Sharia requirements.
4. Audit and transparency:
- All transactions and calculations are permanently recorded on the blockchain for audit by donors, recipients and regulators, enhancing trust.
Technical implementation examples
- Smart contracts based on Ethereum or Stellar: For example, Islamic finance projects (such as ISLA Coin) may build Zakat contracts to support Sharia-compliant stablecoins (such as gold-backed tokens).
- DeFi Integration: Embed Zakat logic into decentralized financial platforms, automatically calculate and distribute Zakat when user assets appreciate.
- On-chain identity verification: combined with KYC/AML systems to ensure that the recipient meets the eight categories of beneficiaries prescribed by the Quran (Surah At-Tawbah 9:60).
Advantages and Challenges
- Advantages:
- Transparency: Eliminate the opacity in traditional Zakat collection.
- Globalization: Facilitating transnational Muslims to fulfill their obligations quickly.
- Efficiency: Automation reduces labor costs and errors.
- challenge:
- Sharia compliance: Islamic scholars are required to review whether the code logic complies with Sharia principles.
- Privacy issues: On-chain publicity may conflict with donors’ need for anonymity.
- Technical barriers: Some Muslim communities may lack the ability to use blockchain.
Practical application cases
- Zakat Chain: A blockchain platform dedicated to Zakat management, supporting multi-asset donation and tracking.
- Humanity Coin: A charity token based on the Stellar network, used in part to automate Zakat distribution.
- Islamic banking cooperation projects: Some banks in the UAE are experimenting with blockchain Zakat systems.
Summarize
Zakah Contract represents the combination of blockchain technology and traditional religious obligations, and automates the execution of religious laws through code. It has the potential to improve transparency, efficiency and global participation, but it also needs to solve practical problems such as compliance with religious laws and privacy protection. In the future, with the development of (Islamic Fintech), such applications may become one of the key scenarios for the implementation of blockchain.
