ShariaQuant raised three concerns about Ducat Protocol UNIT certification. Were these concerns valid and how did CoinStudy respond?

ShariaQuant raised three specific points in a formal submission following CoinStudy's certification of Ducat Protocol UNIT on August 18, 2026. CoinStudy treated each point seriously, sought factual clarification directly from Ducat Protocol founder David Evans, and is processing the results through its formal scholarly review process. Here is the honest and complete status of each point.

Point 1: The Minting Service Charge Calculation

ShariaQuant raised the concern that the 1% Minting Service Charge, being calculated as a percentage of the loan amount, might still function as a loan condition despite the terminology change from Origination Fee to Minting Service Charge that the Chairman reviewed in August. They also raised a specific factual question: is the 1% deducted from UNIT issued so that a user minting 6,250 UNIT receives only 6,187.50 but owes 6,250, creating an excess on the face of the contract?

David Evans confirmed directly that this is not the case. A user who mints 6,250 UNIT receives exactly 6,250 UNIT and owes exactly 6,250 UNIT on redemption. The 1% Minting Service Charge is paid separately at the minting event, in this example as a separate payment of 62.50 UNIT. It is not deducted from the UNIT received and it is not added to the outstanding obligation. The user's obligation does not grow. They return exactly what they minted.

This is the most important factual clarification in the entire exchange. ShariaQuant's specific concern about an excess on the face of the contract has been confirmed not to exist. The Chairman's ruling that the Minting Service Charge attaches to the minting event as a one-time service fee rather than to the ongoing loan obligation is consistent with how the protocol actually operates. This point is fully resolved.

Point 2: Liquidation Surplus and Classical Rahn Rules

ShariaQuant raised the concern that when a vault is fully liquidated the borrower's entire residual equity is forfeited to the protocol and the liquidator with nothing returned to the borrower, potentially violating the classical Rahn principle that surplus after debt recovery belongs to the pledgor.

David Evans confirmed that in partial liquidations the remaining BTC stays in the borrower's vault, which is consistent with classical Rahn surplus return principles. In full liquidations however David confirmed that the borrower does not currently receive surplus collateral back. He explained that the technical design was built to create sufficiently strong and deterministic incentives for liquidators to act during stressed markets, noting that Ducat vaults are Bitcoin Taproot UTXOs with liquidation conditions committed in advance rather than live smart contract auctions.

Importantly David also confirmed that the Ducat team is actively reviewing whether to implement a mechanism that would return any remaining equity to the borrower after covering the debt, execution costs, and a predetermined liquidator reward. He confirmed this change is not currently implemented but is under active review.

Because this specific mechanism was not before the Chairman when the original certification was issued, and because the classical Rahn surplus return rule is directly relevant to this question, CoinStudy has submitted the complete picture to Chairman Dr. Usman Quddus for his formal ruling on this specific liquidation mechanism. We will publish the Chairman's response when received.

Point 3: The Variable Liquidation Fee

ShariaQuant noted that the philosophy page mentioned a variable Liquidation Fee as a separate item from the 15% Liquidation Tax and asked what this fee is and how it is calculated.

David Evans confirmed that there is no separate additional fee charged to the borrower beyond the 15% Liquidation Tax. The variable element is a rebate mechanism: when a vault's collateralisation falls below 125%, the protocol reduces the effective tax by 0.6 percentage points for each percentage point below 125%, capped at the full 15%. This means the borrower's effective tax burden decreases as their position becomes more distressed rather than a new charge being imposed. David acknowledged the philosophy page wording was imprecise and confirmed the team is updating the documentation to describe this accurately as a variable liquidator reward or liquidation-tax rebate rather than a separate fee. This point is fully resolved.

CoinStudy's Assessment

Two of ShariaQuant's three points have been fully resolved through factual clarification from the project team. The third, concerning full liquidation surplus return, is now formally before the Chairman with the complete documented picture. CoinStudy is committed to publishing the Chairman's ruling on the liquidation mechanism when received and will update the Ducat Protocol analysis accordingly.

This process demonstrates how genuine Islamic finance certification works in practice. Concerns are taken seriously, factual clarity is sought from the project before scholarly submission, and the scholarly review follows the evidence rather than commercial convenience. The Ducat Protocol team's direct engagement with these questions, including David Evans returning from holiday and responding promptly and in detail, reflects the same integrity that characterized their cooperation with CoinStudy throughout the original certification process in August 2026.

Read detailed analysis of Ducat Protocol here:
Is Ducat Protocol Halal ?