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What is Theta Network and THETA token?
Theta is a layer 1 blockchain network that incentivizes a global network of computers to operate a decentralized video streaming infrastructure, attempting to address challenges of content delivery networks (CDNs). CDNs are geographically dispersed networks of operators that deliver video stream content to end-users. Due to being restricted by their data centers’ locations, which are not close enough to most viewers, existing CDNs suffer from lack of quality and speed.
Theta’s solution is a peer-to-peer network in which viewers are incentivized to share their excess computing and spare bandwidth resources and are rewarded for doing so.
The network consists of two complementary networks, the Theta EdgeCloud and the Theta Blockchain. The Edge network provides vast amounts of Graphic Processing Units (GPU) compute power for video, AI, gaming compute tasks, and 3D rendering while the Theta blockchain provides payment, reward, and smart contract capabilities.
Theta is also open source, allowing content providers to develop decentralized applications which are specialized for their audience. DApps on the network can provide a range of entertainment types, such as movies and TV, music, esports and gaming, live streaming, and others. Video platforms already running on the Theta Network include Samsung VR, Cinedigm, Shout! Factory, and THETA.tv. More recently, the network has allowed the development of more diverse applications such as DeFi.
The network has two native tokens, THETA coin, used for staking and voting on changes to the protocol, and TFUEL, used for paying gas and executing transactions.
This report is about the THETA token, which has currently reached a market cap of $799 million and is ranked no. 136 on Coingecko.
- Theta Consensus Mechanism
Theta operates a variation of the Proof-of-Stake (PoS) consensus mechanism called multi-level Byzantine Fault Tolerant (BFT). In this mechanism, there are three types of nodes:
- Enterprise Validator Nodes (EVNs) – Around 30 selected companies that stake THETA tokens to propose and produce new blocks in the chain. Current EVNs include global companies such as Google and Samsung.
- Guardian Nodes – Users who also stake THETA tokens to perform work to ensure that the transaction blocks proposed by the EVNs are accurate.
- Edge Node – Edge Nodes are the most numerous and are hosted by Theta community members. They are users who either share their bandwidth or relay video streams over the Theta network in return for TFUEL.
Theta’s consensus mechanism differs from traditional PoS in that there are two levels of security to the protocol, represented in both EVNs and guardian nodes.
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Use Cases of Theta Network
Theta is mainly an entertainment network, though it recently opened its doors to wider applications. Key use cases include:
- Gaming & Esports
This includes livestreams of video games and esports tournaments and competitive matches.
- Film & TV
This includes movies and TV shows via ThetaDrop and partners like Lionsgate and Sony Pictures.
- Music & Live Concerts
Livestreamed concerts and music events as well as music NFTs.
- Creator Content
Streamers, vloggers, and independent content creators publish their own videos on channels like Theta.tv, which is similar to YouTube.
- NFTs & Digital Collectibles
Theta has an NFT marketplace where users can buy, sell and trade NFTs. NFT drops can be tied to movies, music, esports, and influencers.
- AI
AI is a growing use case on Theta. For example, Theta integrates AI-generated video and media assets (like NFT creation, AI avatars, or AI-enhanced video streaming). Theta Edge Network can support AI inference such as translation, recognition and video analysis.
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Use Cases of THETA token
The THETA token has the following key uses:
- Governance token
THETA holders can participate in Theta’s on-chain governance, such as protocol upgrades, parameter changes, and ecosystem decisions
- Staking
THETA can be staked by an EVN or a Guardian Node to participate in the consensus mechanism.
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Shariah Screening
In this section, we will assess some aspects of the Theta blockchain from the Shariah standpoint and subsequently draw Shariah’s ruling about the exchange and use of the THETA token.
Theta’s Shariah compliance will depend on assessing the following elements:
- Project
- Legitimacy
- Underlying Relationships
- Use Cases
- Project
Theta blockchain is a Layer-1 open-source network that offers the infrastructure for developing decentralized platforms for video streaming, supported by AI and NFTs. This purpose per se may not conflict with Shariah. However, the network essentially targets entertainment, particularly esports and gaming, TVs and movies and music. These involve a lot of prohibited elements. For example, games often involve prohibited characters, forms of gambling, adverse mental and psychological impact, and in many instances, they are time-wasting without real benefit. Movies usually involve Shariah disapproved personage dressing and acts.
As a result, the whole project does not align with Shariah objectives.
- Legitimacy
According to auditor CertiK, THETA ranks no. 67 in terms of security, with a score of 91.77 as of date, graded AA.
The Theta documentation provides detailed information about the network. As outlined above, THETA is endorsed by many global companies and institutions, e.g., Samsung, Google, Microsoft. Content and Media Partners include Sony, Lionsgate, American Idol and others. Esteemed institutional investors have invested in the network such as Sierra Ventures and Heuristic Capital. As such, the network in considered at high levels of legitimacy.
- Underlying Relationships
- Relationship between Theta and Viewers
Viewers on Theta platforms (such as Theta.TV) can watch for free. This relationship is a Hiba contract (Gift) contract. Scholars have allowed this type of relationship provided that its subject matter is permissible. Payment (in TFUEL or via NFTs) only applies for premium or gated content, not for general viewing, which is in this case a sale contract subject to the same condition.
- Relationship between Theta and Validators
There are two types of validators, as mentioned earlier: EVNs and Guardian nodes.
To become an EVN, a company must stake a substantial amount of THETA tokens. They earn TFUEL tokens for successfully validating and adding blocks to the blockchain. Validator staking rewards are distributed to the top 31 staked EVNs. Validator Nodes outside the top 31 do not earn rewards.
Similarly, Guardian Nodes must stake an amount of THETA, but much smaller than that staked by EVNs. Guardian Node staking rewards are given in TFUEL, distributed probabilistically every 100 blocks (about 10 minutes). Larger stakes are more likely to be selected, and over time, rewards are proportional to the amount of THETA staked. This mechanism appears to conform with Shariah.
However, the problem with staking is that the transactions that are validated support a lot of prohibited content as outlined in the Project section, which renders the validation process impermissible for such applications.
- Relationship between Theta and Edge nodes
To become an Edge Node, a user must download and run the Theta Edge Node software. This requires dedicating some of the user’s bandwidth and/or GPU. Edge Node operators then receive TFUEL rewards for relaying data and jobs to nearby viewers. This is similar to a Ja’ala جعالة contract. This would be permissible under the condition that the content is Halal.
As outlined above, items sold on Theta involve a lot of prohibited content, making this relationship also Shariah non-compliant in most cases.
- Use Cases
As highlighted in the Project section, use cases of the Theta ecosystem, which are essentially entertainment products, are mostly Shariah non-compliant.
Accordingly, we deem that Theta exchanging is impermissible as it solely empowers such non-compliant use cases through governance and staking.
Conclusion of Shariah Opinion
The THETA token on the Theta Network has been deemed Shariah non-compliant based on a comprehensive analysis. This decision considers the Theta ecosystem’s purposes, structure and use cases.
Theta is a layer 1 blockchain network that incentivizes a global network of computers to operate a decentralized video streaming infrastructure. The network consists of the Theta EdgeCloud and the Theta Blockchain. The Edge network provides Graphic Processing Units (GPU) and compute power for video, AI, gaming compute tasks, and 3D rendering while the Theta blockchain provides payment, reward, and smart contract capabilities. The THETA token is the network’s governance and staking token.
The reason for this decision is the dominance of prohibited entertainment content on the platform and the role THETA token plays in fueling this content through governance and staking.
The analysis emphasizes that the sale and development of prohibited entertainment content is Shariah non-compliant.
