Sharia Fintech: the role of blockchain technology in transforming the Islamic financial system

The Sharia Financial System is a system based on the principles of Islamic law, which prohibits usury (interest), Maysir (speculation), and Gharar (uncertainty). These principles aim to realize transparency, justice, sustainability, and blessings in economic transactions. However, this approach often faces challenges in the form of high transaction costs, limited accessibility, and the potential risk of data manipulation due to centralization. Along with technological developments, blockchain technology has emerged as an innovative solution. In Islamic economics, blockchain technology is aligned with Sharia principles through its advantages in transparency, decentralization, and efficiency. This technology stores data in encrypted blocks that are connected, each block contains several transactions or data, a timestamp, and a reference to the previous block, which creates an immutable data chain (Nehra et al., 2020). With the principle of decentralization, every computer network (node) in the network has a complete copy of the data chain, making the system resistant to manipulation and attacks, so that the transparent nature of the blockchain allows oil participants in the network to see and verify transactions, increasing trust and accountability in the system (Tyma et al., 2022). Verified transactions are combined in a new block and added to the chain through a consensus process (Lasla et al., 2022).