Security, transparency, and accountability are aspects that must be owned by the financial sector in order to support efficiency for each party involved. Generally, every transaction activity must involve an intermediary to collect, record, and distribute funds for certain parties. However, it is not uncommon for the existence of intermediaries in the form of institutions to often lead to various systematic risks that will affect public trust. Cyberattacks are the most vulnerable risk to occur in the current era and can trigger a decline in public trust. In this case, mitigation is needed to solve various problems in the future and alternative instruments are needed so that efficiency can be created in the financial sector, especially in Islamic finance.
A New Endeavor: Blockchain
Blockchain is basically a digital transaction storage system that records all transactions permanently and peer-to-peer (directly from user to user) stored in a decentralized and distributed ledger instead of being stored centrally managed by a third party. In addition, the transactions are spread across all connected users in the network. In order to understand blockchain, there are three main characteristics that must first be understood about the nature of this technology: Decentralization, transparency, and immutability. Decentralization means that information is not stored centrally by a single entity and everyone on the network owns the information. In a blockchain network, transactions can be made without the use of a third party. Transparency means that the blockchain protocol makes it possible for all users to know what transactions are taking place, the amount of transactions, the movement of funds, and other data recorded on the blockchain. Finally, immutability means that any data entered in the blockchain cannot be manipulated and hacked even by hackers who want to try to attack data storage because any data changes will change the storage block chain eternally. This is what makes the security of transaction data guaranteed.
Sharia Blockchain
Blockchain can be likened to the internet which acts as a tool. The halal or haram of the tool is determined by the activities in it. In addition, blockchain is a database, but it is decentralized.
In this case, the type of blockchain is private, where only certain parties participate in recording, validating, and sending each data. The activities on the blockchain network from upstream to downstream are what must be ensured in accordance with sharia principles (sharia-compliant Blockchain).
Activities in recording, validating, and sending data do not only apply to transaction activities such as those owned by cryptocurrencies that are commonly known. The data that can be distributed in this protocol can include pure digital currencies, fiat-backed digital currencies, pure digital assets, real asset-based digital assets, digital smart-contracts, pure digital records, and paper-based digital records.
Blockchain for Halal Supply Chain
Not only that, the problems currently often faced by the halal industry in the form of tracking the location of products from upstream to downstream, transportation and storage; differences in halal systems and differences in halal interpretation of products; and the lack of integration with existing information technology systems, can at least be solved by blockchain technology which is also a means of strengthening the halal industry supply chain.
Blockchain for the Islamic Non-Bank Financial Industry
Takaful: The biggest challenge facing the Islamic insurance industry is efficiency. The existence of blockchain-based technology can increase efficiency, transparency, and security for premium payers because every transaction activity can be tracked in real-time by managers so that transaction data cannot be changed by anyone;
Sukuk: The application of blockchain technology to sukuk would be a good strategy. This innovation is estimated to reduce the cost of sukuk issuance by 50-70%.
Sharia Crowdfunding: Problems in crowdfunding systems such as multi-layered transaction contracts can be answered by blockchain technology thanks to its transparent, immutable, and traceable characteristics.
Blockchain and Cryptocurrency Regulations in Indonesia
Blockchain technology and cryptocurrency are two discussions that cannot be separated. So, discussions regarding blockchain regulations are closely related to regulations regarding cryptocurrencies. One of the rules governing cryptocurrencies is regulated in Government Regulation no. 5 of 2021 concerning Implementation of Risk-Based Business Licensing. In these regulations, blockchain will later be classified as a business that can be a reference for Web3 startup founders to operate in Indonesia.
The Urgency and Future of Blockchain Technology for the Ummah
Currently, the world of information technology is in the Web 2.0 phase, which allows users to 'read and write', thereby creating social media and the creator economy, such as Facebook, Instagram, YouTube, and so on. In the next few years, the world will enter the era of Web 3.0-based technological revolution where blockchain is the foundation of the technology. Web 3.0 allows users to “read, write, and own” which means everyone can have full access to their own data.
