Shariah Compliance
How SalamCraft adheres to Islamic finance principles
Principles
SalamCraft is designed to comply with the core principles of Islamic finance:
- No Riba (Interest) — All financing uses Qard (interest-free loans); fees are Ujrah (service fees)
- No Gharar (Excessive Uncertainty) — Positions have clear terms, oracle prices, and defined mechanics
- No Maysir (Gambling) — Trading is based on real asset prices with economic purpose
- Asset-Backed — All positions involve real token exchanges within the pool
Qard (Interest-Free Loan)
Both buy and sell positions use Qard — the pool provides an interest-free benevolent loan to the trader:
- Buy (long): Pool lends USDC (quote token) via Qard. Trader uses it to buy the base asset.
- Sell (short): Pool lends base tokens (e.g. SOL) via Qard. Trader sells them for USDC.
The Qard must be repaid in full when the position closes. No interest is charged on the loan. This is the key structural difference from conventional margin trading, which relies on interest-bearing loans.
Wakalah (Agency)
The actual buy/sell trade is executed via Wakalah — the pool acts as the trader's agent to execute the exchange at the Pyth oracle price. This is a separate contract from the Qard financing:
- The Qard provides the capital
- The Wakalah executes the trade
- These are distinct steps with distinct Islamic contract justifications
Rahn (Collateral Pledge)
The trader's margin is structured as Rahn — a pledge of real USDC collateral that secures the Qard loan. If the position moves against the trader, losses are deducted from the Rahn. If the Rahn is exhausted, the position is liquidated.
Ujrah (Service Fees)
All fees in SalamCraft are structured as Ujrah (service fees), not interest:
- Opening Ujrah — flat fee on notional at position open
- Closing Ujrah — flat fee on notional at position close
- Daily Ujrah — service fee for ongoing risk management, based on pool utilization
- Liquidation fee — compensation to the liquidator for closing unhealthy positions
The daily Ujrah compensates LPs for locking their capital and assuming counterparty risk. It is a service charge, not time-value-of-money interest.
How This Differs from Conventional Perps
| Aspect | Conventional Perps | SalamCraft |
|---|---|---|
| Financing | Interest-bearing margin loan | Qard (interest-free benevolent loan) |
| Trade execution | Synthetic/virtual positions | Real asset exchange via Wakalah |
| Fees | Funding rate (interest-like) | Ujrah (flat service fees) |
| Collateral | Margin with interest accrual | Rahn (pledge, no interest) |
| Settlement | Often no real assets | Real token pools with actual transfers |
Settlement Waterfall
When a position closes, settlement follows a strict priority order:
- Qard repayment — Pool's loan is repaid first
- Ujrah fees — Service fees deducted
- Profit cap — Profit limited to protect the pool
- Remaining to trader — Whatever is left goes back to the user
This ensures the Qard is always whole before any profit distribution.
Disclaimer
SalamCraft has been designed with Islamic finance principles in mind. However, individual scholars and jurisdictions may have varying interpretations. We encourage users to consult with their own Shariah advisors regarding the permissibility of participation.