Are NFTs Halal? Everyone is talking about Non-Fungible Tokens or NFTs. Corporate board rooms, as well as news feeds, have been discussing NFT projects that are promising and the ones that are not. No doubt the topic has become the talk of the town. But, we as Muslims, need to understand whether NFTs are Halal or Shariah-compliant. Should we invest in an NFT opportunity? What are a few examples of NFTs we may want to invest in? What are the emerging trends in the industry?
We will try to address these issues in the following lines as this asset class has become popular all over the world recently. The year 2021 proved to be a banner year for NFTs as the trade grew 2100% during the 12 months.
Being a prudent Muslim investor, you need to understand the basics of NFTs before making an investment decision in this asset class.
Related: Is the Metaverse Halal?
What Are Non-Fungible Tokens (NFTs)?
According to Wikipedia, “A non-fungible token (NFT) is a non-interchangeable unit of data stored on a blockchain. It is a form of digital ledger, that can be sold and traded. Types of NFT data units may be associated with digital files such as photos, videos, and audio. Because each token is uniquely identifiable, NFTs differ from blockchain cryptocurrencies, such as Bitcoin?.
We need to understand two important concepts. First, NFTs are special types of tokens which represent a unique asset. On the other hand, fungible means that you can replace something with something similar in nature.
Hand-made sculptures are a form of NFTs. Can you think of any other types of NFTs as well? You will get to know a bit more about this topic.
Related: Is Cryptocurrency Halal?
Are NFTs A Fad?
Some industry insiders tend to believe that this asset class is just a fad that has no future. Spending a hefty amount of money to buy something which you do not physically own is ridiculous.
Are NFTs Halal or Shariah-Compliant?
Mufti Faraz Adam has aptly discussed the Shariah-compliance aspect of the topic in detail. In principle, NFTs are Halal. They can be considered Shariah-compliant if they do not represent any of the following.
- anything unlawful to see in Shariah
- a vice or unlawful substance or object
- anything sacred in Shariah that is prohibited to portray such as Allah, the Prophets (pbuh), etc.
- ridiculing or disfiguring other people
- limbs and areas that the Shariah orders to be covered and concealed.
What Are Examples of NFTs?
According to Mufti Faraz Adam, common NFTs have been produced in the following industries. However, there are several other uses of NFTs as well
- In-game items
- Data and Licencing
Related: How To Make Your Brand Halal?
What Are the Major NFT Trends?
We plan to discuss five emerging NFT trends which might be taking place in 2022 and beyond. These trends are expected to help us create a virtual reality where human interaction becomes fun.
- Major social platforms to verify NFTs
- NFT prices will decrease as sidechains become prevalent
- Music may be the next big frontier in the NFT marketplaces
- Spending on wearable NFTs to increase
- Dynamic avatars related to NFTs may gain popularity
What Are The Top NFT Marketplaces?
The following is a list of the top NFT marketplaces where you can buy or sell any NFTs of your choice.
- Funoon. This is the first-ever marketplace for selling digital arts, sports, and collectibles
- Open Sea. This is perhaps the most popular — and, by far, the largest — NFT marketplace these days
- CryptoPunks/Larva Labs. CryptoPunks is one of the earliest examples of NFTs on the Ethereum blockchain
- Super Rare
- Known Origin
- Makers Place
- Nifty Gateway
Related: Is Ordering Pizza Halal?
Why Should You Invest in NFTs?
Based on the info available out there, we believe that there is nothing inherently wrong with using an NFT to prove ownership of the asset. In the same way, making a profit from trading NFTs is halal or haram based on whether or not the item for which ownership is being proven using the NFT is halal or haram. That is the question you should ask while making a judgment.
Some scholars argue that trading outrageously expensive NFTs is a kind a waste of money. Therefore, Islam discourages that.
That is an important question for you to consider. Being a Muslim you have to think hard about NFTs. Why, because you do not want to spend money on something which does not give you or someone else any tangible benefit.