A Proposed Shariah-Compliant Framework for Performance-Based Digital Assets
Version 1.1 | For Scholarly and Clerical Review
Abstract
The advent of blockchain technology offers novel opportunities to structure financial instruments that adhere strictly to the principles of Islamic jurisprudence. This whitepaper details the operational and Shariah framework of ShareMatch, a platform designed to issue digital tokens representing a participant's pro-rata share in a pool of assets. The value of these tokens, termed Performance Index Units, is tied directly to the real-world performance of the underlying assets, governed by a pre-disclosed, deterministic formula.
The structure is predicated on the Islamic contract of `Wakala` (agency), wherein ShareMatch acts as the agent (`Wakil`) on behalf of the participants. The entire mechanism is designed to systematically preclude `Riba`, `Maysir`, and `Gharar`. This document elucidates the technical and contractual architecture, risk mitigation strategies, and governance model, including the role of the Shariah Supervisory Board, to demonstrate the platform’s compliance and viability as a permissible alternative investment vehicle.
Disclaimer
This document is intended solely to provide an overview of the ShareMatch framework for the purposes of scholarly and clerical review. It does not constitute financial, legal, or investment advice. All project details, timelines, and strategies outlined are subject to revision pending regulatory and Shariah board approvals.
The digital assets described herein are inherently volatile and subject to market risks. While ShareMatch employs robust security measures, blockchain technology carries intrinsic technical risks. Participation in this platform may be restricted in certain jurisdictions. Prospective participants are solely responsible for ensuring compliance with the laws and regulations of their respective jurisdictions and are strongly encouraged to consult independent professional advisors.
Introduction
This document presents for scholarly review the ShareMatch platform, a proposed alternative investment structure issuing Performance Index Units. The framework is designed from inception to preclude interest (`Riba`), speculation (`Maysir`), and excessive uncertainty (`Gharar`).
Alignment with Vision 2030
The proposed KSA-first launch aligns with Vision 2030 by seeking to deepen capital markets, foster financial innovation, and broaden the availability of compliant investment choices, thereby embedding cultural and religious values within a modern financial context.
Core Principles of Compliance
- Shariah First: The structure is founded upon the Islamic contract of `Wakala` (Agency).
- Radical Transparency: All formulas, fees, and operational terms are pre-disclosed.
- Objective Performance: Net Asset Value (NAV) is adjusted solely via the deterministic, pre-disclosed formula.
Proposed Product Architecture
The platform's architecture is comprised of three core Shariah-compliant components: the Performance Index Units, the Vault Model, and the Performance Formula. These elements are designed to function together in a transparent, rules-based ecosystem.
1. Performance Index Units
The digital assets representing a participant's share in an index are defined by the following characteristics:
- Perpetual: The units themselves do not have an expiration date.
- Whole-Unit Issuance: To maintain simplicity, units are issued as whole numbers (decimals = 0).
- Transfer-Restricted: Transfers are only permitted between KYC-verified, whitelisted addresses within the venue.
- Redeemable: Units can be redeemed for their pro-rata share of the vault's underlying assets (USDT).
2. The Vault Model (ERC-4626)
Each index is a distinct, tokenized vault holding the quote asset (USDT). The vault's smart contract is responsible for:
- Asset Custody: Securely holding all participant assets.
- Minting & Burning: The creation of new units upon deposit and their destruction upon redemption.
- NAV Accounting: Ensuring the Net Asset Value is transparently and verifiably calculated on-chain.
- Standardization: Adherence to the audited ERC-4626 standard for security.
3. The Performance Formula
The sole driver of NAV change is a pre-approved, deterministic formula. It allocates positive credits to the top 'N' performers based on objective, verifiable data. All weights and rules are disclosed in advance to eliminate ambiguity (`Gharar`), ensuring that value is derived from performance, not speculation (`Maysir`).
Operational & Contractual Flow
This section illustrates the lifecycle of participation on the ShareMatch platform, from initial onboarding to the periodic rebalancing of asset values. Each step is designed to adhere to the principles of the `Wakala` contract.
Secure and compliant identity verification.
Deposit of assets and minting of Units.
Exchange of units between whitelisted participants.
Application of the pre-disclosed performance formula.
A unilateral promise for repurchase at NAV.
Supporting Technical Architecture
The platform's Shariah-compliant framework is executed through a secure and transparent technical architecture, combining the immutability of the Ethereum blockchain with established token standards.
This layered approach provides the security of the public blockchain while enabling a controlled, high-throughput environment necessary for financial applications. The use of audited, standardized smart contracts ensures operational integrity. Off-chain data is securely introduced via a multi-signature oracle with a dispute window to ensure authenticity.
Governance and Shariah Oversight
A robust governance framework, centered on proactive risk management and vigilant Shariah supervision, is fundamental to the platform's integrity. All operations are subject to review by an independent Shariah Supervisory Board.