Is API3 (API3) Halal or Haram?
Shariah compliance review of API3 (API3) by Islamic finance scholars at EthicalNode, with separate verdicts for trading and for staking.
Trading verdict: Comfortable
Smart contracts often face challenges in accessing reliable data, but application programming interfaces (APIs) are seen as a potential solution. API3 aims to enable decentralized APIs to be built, managed, and monetized at scale, emphasizing the need for smart contracts to access timely and reliable real-world data as blockchain technology becomes increasingly important in various sectors. The API3 whitepaper, released in September 2020, highlighted the current connectivity issue, as smart contracts cannot directly connect with APIs for up-to-date information, leading to the rise of oracles. However, oracles introduce additional costs and centralization, known as the "Blockchain Oracle Problem." API3 seeks to address this by allowing API providers to run their own nodes, eliminating the need for middleware. Sharlife.my: The project does not have any problem in terms of Shariah rulings.
Staking verdict: Comfortable
API3 is governed by a decentralized autonomous organization (DAO3) that allows all stakeholders to participate in governance through the API3 token, which provides voting power. The DAO decides on key parameters like staking incentives, collateralization, and project direction, while teams can apply for grants to execute beneficial projects. The API3 token serves three main utilities: staking for rewards, collateral for service coverage, and governance for representation in the DAO. A single staking pool aligns these utilities, enabling participants to share risks and maximize the usage of API3 services.
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