To understand the significance of Bitcoin, it is necessary to first understand the system it is challenging. This appendix provides an overview of how modern money works, why the current financial system is fundamentally flawed, and how Bitcoin offers a real, practical alternative. For Muslims, the greatest concern with the system is its reliance on interest, which is categorically prohibited in Islamic law. Beyond that, it also raises serious questions about justice, stability, and long-term economic wellbeing—and Bitcoin offers a possible way out.
Before examining Bitcoin as a monetary alternative, we must first understand the nature and function of money itself. In any society, individuals cannot produce everything they need on their own. They must therefore trade surplus goods—such as eggs—for what they lack, such as a loaf of bread. This system is known as bartering. However, bartering only works efficiently when both parties want what the other has. If the bread seller doesn’t want eggs, the buyer must first trade his eggs for something the baker does want—for instance, apples. He can then offer those apples in exchange for the bread he originally wanted. In this scenario, apples have temporarily functioned as a medium of exchange, even though no official currency exists.
As bartering is not practical long term, it becomes convenient for everyone to standardise on a single asset to function as a medium of exchange. This then becomes the local currency (or money). Historically, various items were used by different societies as money, such as cows, seashells, cheese, and rocks.[1]
However, some assets function better as money than others. Usually, the best currency is the one which is most convenient to transact in. For example, it must be easy to carry and move around, so that people can easily pay with it when shopping. Likewise, it must be easily divisible so that people will be able to exchange it for both low and high value items. Finally, it must be able to hold its value across time. For example, adopting houses as a currency would be impractical as they are difficult to transport and are not easily divisible to pay for small value items. However, they are very good at holding their value across time. On the other hand, apples or bananas are comparatively easier to transport, but do not hold their value across time as they will eventually become consumed or rot.
Thus, money arises naturally in every society as a tool to solve the limitations of barter—but not all forms of money are equally good or fair.
Most importantly, a good form of money must be difficult to produce more of. When new money is produced, this benefits the producer and causes the overall value of the money to reduce, which harms everyone else who owns that money.
This is based on the economic principle of demand and supply. When more of a product is made, more of it is available to purchase in the market. However, the number of people looking to purchase the product at the current price does not necessarily increase. The producer has to lower the price if he wants to sell the excess product. Therefore, increasing the supply of something usually causes the price to fall. The opposite is also true: when a product becomes scarce, its price usually rises because there is a shortage of the product in the market and buyers are usually willing to pay more to obtain it.
This same principle also applies to money. If a society adopts a form of money that is easy to produce, the producers of that money can create as much of it as they like for themselves to spend. As this additional money enters the market, it creates a surplus of purchasing power. Sellers begin to notice that people are more willing—and able—to pay for goods. This is especially true for scarce necessities or luxury items that most people would ordinarily not afford. As demand rises for these items, sellers raise their prices. The result is that prices increase more broadly across the economy, and the value of money declines. This phenomenon is known as inflation.
There are many examples in history where a society that used easy-to-produce money saw the value of their money collapse. In Africa, for example, certain communities used glass beads as currency, which were scarce locally. When Europeans discovered this, they began mass-producing imitation beads and shipping them to Africa, using them to buy goods, resources, and even slaves. By the time the local population realised their currency had been debased, much of their wealth and freedom had already been taken.[2]
A similar event occurred on Yap Island, where large limestone discs were used as money. An Irish sailor discovered he could quarry the same type of stone from nearby islands and shipped it back in large quantities, exchanging it for local goods. In both cases, the sudden increase in money supply—from an outside source—destroyed the value of the local currency.[3]
Even in modern times, we see similar patterns. In Venezuela, for example, the government printed money in vast amounts to finance its spending. As more money flooded the market, the value of the currency collapsed, leading to hyperinflation and economic ruin.[4]
It becomes clear from these examples that when money is easy to produce, there is nothing to stop people from producing more of it. This means that it is unlikely to hold its value well over time, and therefore it will not make a good currency.
Gold and silver have served as popular forms of money throughout history due to their unique properties. They are rare, difficult to produce in large quantities, and durable over time. Gold in particular is chemically stable—it does not rust or degrade—and most of the gold ever mined still exists today. Additionally, the rate of new gold production is consistently low—typically ranging between 1–2% of total stockpiles each year.[5] This means inflation in the supply of gold is naturally constrained, unlike modern fiat currencies. Silver shares many of these characteristics, though to a lesser degree, as it is more abundant and has historically held its value slightly less well than gold. Due to these qualities, gold and silver are commonly regarded as the best forms of money.
However, even with these hard monies, rulers found ways to manipulate the currency to their advantage. By controlling the minting process, they could debase the currency—for example, by re-minting coins with reduced gold or silver content while keeping their face value the same. Over time, this practice led to inflation, rising prices, and widespread poverty. In many cases, such as during the Roman empire, repeated debasement contributed to economic instability and was a factor in their eventual collapse.[6]
In fact, this practice of currency debasement continued throughout history and into the modern era, merely evolving into more sophisticated forms.
In the 19th century, most countries adopted what became known as the gold standard: a system in which each unit of national currency represented a specific weight of gold. Banknotes could be exchanged for the gold they stood for, and international exchange rates were fixed based on the relative gold content of different national currencies.
The adoption of the gold standard was not accidental. Countries chose to peg their currencies to gold because of its stability and to facilitate trade with other gold-standard countries. Though most countries adopted the gold standard, some economies—such as China and India—operated on a silver standard instead. However, their currencies lost value significantly against gold-standard currencies, as the value of silver declined relative to gold.
In theory, the gold (or silver) standard made inflation impossible. Since each note could be redeemed for a fixed amount of gold or silver, banks and governments were restrained from issuing more notes than the amount of metal they had in reserve. People could always demand physical gold in exchange, which forced institutions to remain accountable.
In practice, however, banks did often issue more notes than they had gold, gambling that not all depositors would want to redeem them at the same time. This risky practice left them vulnerable to what became known as a bank run—when too many people attempted to withdraw gold at once and the bank did not have enough gold to facilitate withdrawal. In such cases, the banks collapsed and depositors lost all of their savings. Governments also took advantage of the system by printing excessive amounts of paper currency to spend during crises such as war, despite not having the gold reserves to back them. When people lost confidence in the currency, they would demand their gold back in exchange—gold which, in many cases, had never existed.
As people increasingly relied on paper notes rather than physical gold coins in daily transactions, gold was gradually consolidated in banks. This centralisation made it easier for governments to effectively take control of their citizens’ gold. By regulating the banking sector and establishing central banks, they were then able to control the money supply, creating new money as they pleased, without having to worry about the gold it (supposedly) represented. What began as a decentralised, trust-based monetary system gradually transformed into a centralised, politically influenced fiat system—one no longer anchored to gold at all.
As we have seen earlier, one of the most dangerous tendencies throughout monetary history has been the temptation to create more money than real wealth can support. In the modern financial system, this process has become systemic.
Money today is created simply through the issuance of loans. This lending occurs at every level: central banks loan money to governments and large corporations, commercial banks loan to individuals, and rich countries loan to poorer ones. In every case, the money does not already exist; it is created at the moment the loan is issued. Once the loan is repaid, the principal is destroyed, but the lender keeps the interest as pure profit.
Because banks profit from interest, they are incentivised to issue as many loans as possible, even if doing so inflates the money supply far beyond what the economy can absorb. This is the continuation of the same old temptation: to produce ‘free money’ for the lender, at the expense of everyone else who holds money and sees its value erode.
Inflation is the hidden consequence of the constant creation of new money. As surplus money enters the market, the supply of currency rises, diluting its value and pushing prices upward. Inflation is, simply put, the steady decrease in the purchasing power of money.
For example, £100 in 2014 could buy what requires around £130 today—meaning that, in a single decade, money has lost nearly a quarter of its value.[8] This silent erosion punishes those who save and rewards those who spend quickly or go into debt.
Inflation pressures people to consume now rather than later. It also encourages borrowing, since a loan taken out today will be repaid in devalued money tomorrow. In this way, the modern fiat system penalises patience, thrift, and responsibility—the virtues that once formed the bedrock of personal and societal stability.
As inflation discourages saving and long-term thinking, it reshapes society itself. High time preference—the prioritisation of immediate gratification over future benefit—becomes the cultural norm. People are incentivised to spend recklessly, to take out loans they cannot afford, and to value the present moment over future security. As a result, chronic wastage of food, water, and other essential resources becomes widespread, even as hunger and poverty persist across the world. Agricultural practices, driven by the pursuit of rapid yields, often sacrifice long-term soil health, leading to widespread degradation and desertification. Meanwhile, industries often make products that are designed to become obsolete quickly, adding to overflowing landfills and speeding up environmental damage. When the very structure of money rewards short-termism, it should not surprise us that entire societies adopt unsustainable habits.
Because inflation encourages borrowing, and borrowing is cheaper for the wealthy than the poor, the financial system creates deep and systemic inequality.
Wealthy individuals and corporations can access cheap loans at low interest rates. They use this borrowed money to invest in appreciating assets such as property, stocks, and businesses—growing their wealth even further. Meanwhile, ordinary people often borrow at higher interest rates simply to meet basic needs, such as housing, education, or healthcare.[9]
For the wealthy, debt is a tool to multiply riches. For the poor, debt becomes a trap that is difficult to escape. The result is an ever-widening gap: the rich are rewarded, and the poor are punished—not by accident, but as a structural feature of the modern financial system.
The same dynamics that trap individuals in debt play out on the global stage. Wealthy countries and international institutions lend to poorer nations, often under conditions that are almost impossible to fulfil. In exchange for continued access to loans, debtor nations are required to restructure their economies according to the demands of the lenders: privatising industries, opening markets to foreign corporations, and shifting exports toward cash crops or raw materials that benefit foreign interests, often at the expense of local needs and self-sufficiency.[10]
These policies often strip poorer countries of their economic independence and natural resources, keeping them in a state of permanent dependency. Their economies are reshaped not for the benefit of their own citizens, but for the enrichment of foreign powers.
Modern financial colonialism is, in many ways, more insidious than the old models of empire: it enslaves nations not by force of arms, but by chains of debt.
While the modern financial system is built on endless expansion and centralised control, Bitcoin offers a fundamentally different model. It has a fixed supply that cannot be inflated, no central authority that can manipulate it, and rules that cannot be changed without broad community consensus from its global user base. Bitcoin is secured not by trust in governments or banks, but by mathematics and open participation. Changes to its core design are actively resisted by its users, who work collectively to preserve its original form.
The mechanism through which Bitcoin protects itself from tampering has been insightfully compared to the way groups of ḥuffāẓ (memorisers of the Qur’ān) safeguard the accuracy of the sacred text. Just as each ḥāfiẓ carries a complete copy of the Qur’ān in memory, and any one of them may correct another if a mistake is made, each Bitcoin node stores the full transaction history and cross-checks all new information against it. If a memoriser recites a verse incorrectly, others immediately recognise the error and correct it, ensuring the text remains preserved through constant mutual verification. Similarly, if a Bitcoin node tries to add a false or inconsistent transaction, the rest of the network recognises the discrepancy and rejects it. Each node, like each ḥāfiẓ, operates independently but cooperatively, creating a self-correcting system that is resilient to tampering. This analogy illustrates how Bitcoin’s integrity is preserved, not through central enforcement, but through a decentralised structure in which every participant plays a role in maintaining accuracy and consistency.[11]
This decentralisation also makes Bitcoin censorship-resistant: no single entity can gain control over it, and no government can shut it down. In a world where money is routinely abused, Bitcoin presents a resilient and compelling alternative, one that offers the possibility of a more just, transparent, and incorruptible system of value.
Ammous, Saifedean. The Bitcoin Standard: The Decentralized Alternative to Central Banking. Wiley, 2018.
[1] How Has Money Changed Over Time? Bank of England, accessed 20 July 2024. bankofengland.co.uk
[2] Lankton, James W. “Akori Beads and the African Trade.” Beads: Journal of the Society of Bead Researchers 22 (2010): 52-70. surface.syr.edu. Also see The Many Lives of Akori Beads. Perspectives on History, American Historical Association, December 23, 2023. historians.org. For an interpretive account of its economic consequences, see Akori Beads, Hyperinflation and the Ancient African Economy. Afrikapital, July 22, 2020. afrikapital.org.
[3] David O’Keefe: The King of Hard Currency. Smithsonian Magazine, July 28, 2011. smithsonianmag.com.
[4] Venezuela’s Central Bank Releases Data Showing Dire Economy. Wall Street Journal, May 28, 2019. wsj.com.
[5] This figure is cited in The Bitcoin Standard, based on long-term U.S. Geological Survey data. See Saifedean Ammous, The Bitcoin Standard, chap. 3, fig. 1. For recent annual figures, see Gold Demand Trends: Full Year 2023 – Supply. World Gold Council, Jan 31, 2024. gold.org; and Full Year 2024 – Supply, Feb 5, 2025. gold.org.
[6] Metallic Money: Roman Debasement and Collapse. Encyclopaedia Britannica, accessed May 06, 2025. britannica.com.
[7] Small Change: Currency and the Gold Standard. Olympic Britain, House of Commons Library, July 10 2012. parliament.uk.
[8] Based on the Bank of England’s official inflation calculator. See “Inflation Calculator.” Bank of England, accessed August 4, 2024. bankofengland.co.uk.
[9] For examples of preferential loan terms offered to the wealthy, see How the Super-Rich Buy Their Homes. Financial Times, Nov 5 2021. ft.com.
[10] The Effects of IMF Loan Conditions on Poverty in the Developing World. Journal of International Relations and Development 25 (2022): 806–833. doi.org/10.1057/s41268-022-00263-1.
Also see Structural Adjustment: How the IMF and World Bank Repress Poor Countries and Funnel Their Resources to Rich Ones. Bitcoin Magazine, Nov 30, 2022. bitcoinmagazine.com.
[11] This analogy is cited in the Talkhīṣ Maqālāt (summary of submissions) presented during the 19th Annual Fiqh Seminar of Jamiat Ulama-i-Hind (Idārah Mabāḥith-i-Fiqhiyyah), where it is attributed to Muftī Muḥammad Inʿām al-Ḥaqq Ṣāḥib of Maḥkamah Sharʿiyyah, Mahdīpaṭnam, Hyderabad. The Talkhīṣ summarises the written responses submitted by participating scholars and was read aloud at the seminar prior to open-floor discussion. It can be accessed at: imf-juh.in (see bottom of page 15).