Skip to content

BURNED_M_EFFORT.md

Latest commit

 

History

History
114 lines (76 loc) · 3.22 KB

BURNED_M_EFFORT.md

File metadata and controls

114 lines (76 loc) · 3.22 KB

Burned M-Effort — Manager Effort Loss Concept

Author: Abdulwahed Mansour

Overview

Burned M-Effort (Burned Manager Effort) is a core concept in the Sunna Protocol that implements the Islamic finance principle of Ghunm bil-Ghurm — whoever gains must also bear the risk of loss.

When a Mudaraba project results in a net loss, the manager (Mudarib) loses their accumulated effort (JHD) for that project. This effort is permanently "burned."

Mechanism

When Does Burning Occur?

Burning occurs when a Mudaraba project is finalized with a net negative return:

IF project.netProfit < 0:
    manager.burnedJHD += project.managerJHD
    project.status = BURNED

The burn is triggered automatically by the MudarabaEngine during project settlement.

What Gets Burned?

  • All JHD accumulated by the manager on the specific failed project.
  • Only effort on the failed project is affected — other projects remain intact.
  • The burned amount is the full JHD balance for that project, not a partial amount.

What Does NOT Happen?

  • The manager is NOT financially penalized beyond effort loss.
  • No tokens are slashed or confiscated.
  • No reputation "penalty" is applied — the burn IS the consequence.

Sharia Justification

In classical Mudaraba contracts:

  • The investor (Rabb al-Mal) provides capital and bears financial loss.
  • The manager (Mudarib) provides effort and bears effort loss.

This is the principle of Ghunm bil-Ghurm: the right to profit comes with the obligation to share in loss. The Sunna Protocol enforces this digitally.

Party Contributes On Profit On Loss
Investor Capital Profit share Capital loss
Manager Effort Profit share Effort burned (JHD)

Burning is not punitive. It is the natural, agreed-upon consequence of a failed venture. Just as the investor cannot recover lost capital from the manager, the manager cannot recover burned effort from the investor.

On-Chain Recording

Burned M-Effort is recorded permanently on the SunnaLedger:

struct BurnRecord {
    uint256 projectId;
    address manager;
    uint256 burnedJHD;
    uint256 projectLoss;
    uint256 timestamp;
}
  • Records are immutable once written.
  • Any party can query a manager's burn history.
  • Burn records are factored into the manager's lifetime efficiency score.

Impact on Reputation

Burned M-Effort directly affects a manager's on-chain reputation:

  • Lifetime Efficiency decreases because burned projects contribute zero profit but non-zero effort to the denominator.
  • Burn Ratio = Burned_JHD / Lifetime_JHD — a high ratio signals higher risk.
  • Investors can query these metrics before committing capital to a manager.

Example

A manager runs two projects:

Project JHD Net Profit Status
Alpha 200 +$10,000 Active
Beta 150 -$5,000 Burned
  • Lifetime JHD: 350
  • Burned JHD: 150
  • Burn Ratio: 150 / 350 = 42.8%
  • Lifetime Efficiency: ($10,000 × 100) / 350 = 2,857

Last updated: 2026-02-22