HAQQ's Strategic Evolution: Migration to an Ethereum L2

Today, we are excited to announce a proposal for HAQQ Network’s journey: migrating from a Layer 1 blockchain to an Ethereum Layer 2 chain, specifically built with the Optimism technology stack.

This proposal is made in pursuit of a more efficient and accessible blockchain ecosystem. Since its inception, HAQQ Network has been dedicated to empowering a vast and previously underserved user base through decentralized technologies. The mission has always been ambitious: to onboard 2 billion Muslims into the decentralized space, integrate the ~$4 trillion Islamic finance market into Web3, and introduce an ethical approach to finance and innovation that benefits both Web3 and traditional markets worldwide.

As blockchain adoption accelerates, so do the demands for greater network efficiency, scalability, security, and interoperability. What started as a simple Layer 1 vs. Layer 2 blockchain discussion during a community call months ago, quickly evolved into a larger conversation, sparking widespread engagement across community channels. As the dialogue deepened, curiosity turned into conviction. The potential benefits became impossible to ignore, with community enthusiasm and insights playing a pivotal role in driving an in-depth evaluation. These benefits include:

• Access to a broader user base.
• Access to a harmonized ecosystem of developers.
• Access to a broader market of dApps.
• Access to deeper liquidity.
• Accessibility of HAQQ-hosted dApps and cross-chain protocols by other EVM ecosystems  
• Better UX (block times and cross-chain bridging)

The list goes on, however, the above 6 points exemplify some of the benefits of the proposed move. Specifically, this will assist with our endeavors to onboard ethically oriented finance based on real-world activity. 

The liquidity gap between Cosmos and Ethereum has continued to , reinforcing the proposed shift toward Ethereum. As of March 2025, according to DeFi Llama:

• The total DeFi TVL stands at $201.332 billion, with Ethereum alone accounting for $123.721 billion—61.46% of the entire market.
• In stark contrast, the combined TVL across 50+ Cosmos-based blockchains is just $2.235 billion.
• One of Ethereum’s rollups alone holds +$13 billion in Bridged TVL.

These figures highlight Ethereum’s dominant role in DeFi, offering unparalleled liquidity and composability—key factors in HAQQ’s evolution.

Looking Back at Our Journey

Since its inception, HAQQ has been committed to addressing the real-world needs of Muslims and introducing an ethical, value-driven approach to web3 and crypto. For years, HAQQ operated as an EVM-compatible L1 blockchain within the Cosmos ecosystem, built using Cosmos SDK and leveraging IBC for communication. The mission was clear: to provide a secure, decentralized, and scalable ethical infrastructure for ethical applications. This is what we promised, and this is what we delivered.  

The Turning Point

Recent market events exposed the scalability challenge of monolithic blockchains. While the Cosmos' app-chain model offered sovereignty and flexibility, it came at the cost of fragmented liquidity, fractional environments, and a lack of harmony between development teams, in addition to scalability and cost challenges common to independent networks. This is contrary to the Ethereum ecosystem and the burgeoning environments growing on Layer 2’s such as Optimism, Base, Arbitrum, etc.

The goal for any blockchain is to become both self-sustaining and self-developing. In turn, this requires harmony and compatibility with friends and partners within your local ecosystem. The harmony and compatibility observed within the broader Ethereum ecosystem, specifically with regards to Layer 2’s such as Optimism and Base are absent within Cosmos. 

Following the experience of the last two years, it would seem, to reach our aforementioned goals, an analysis and action was/is required to provide a firm basis for growth. In line with the above the harmony of development and partnership dovetails with our collective hopes for independent development and partnerships that will organically grow HAQQ Network. 

The composability and interoperability of Ethereum is unparalleled and efficient access can be derived by deploying as a Layer 2 protocol within Ethereum’s Layer 1 environment. For the avoidance of doubt, the analysis has highlighted these factors cannot be obtained in any other way. Additionally, the liquidity environment, access to yield aggregators, DEX’s fellow chains, investors, and optimization protocols far outweigh the possibilities in Cosmos. 

By way of exemplar, projects on Ethereum contribute to one another regularly, Layer 2’s may contribute to repositories of Layer 1’s and vice versa, all working together in the spirit of what was originally imagined at the genesis of distributed ledger technology. 

Benefits of Migrating to an Ethereum L2

This proposed migration will bring significant advantages to developers, projects, and users, including:  

• Ethereum Security & Credibility

HAQQ will tap into Ethereum’s battle-tested security guarantees, ensuring a more resilient network.  

• Leveraging Ethereum and Partners Advancements

The ability to leverage Ethereum’s continuous advancements in scalability and efficiency: sequencing, account abstraction, etc. As previously stated we would also have access to other partners' developments on Ethereum, e.g. Optimism protocol development.

• Interoperability with the Ethereum Ecosystem (inclusive of other Layer 2 protocols)

Existing Ethereum-based L2s, applications, assets, and protocols can work more seamlessly with HAQQ, eliminating barriers to adoption. Being an Ethereum L2 means HAQQ would no longer be an isolated ecosystem. It will have much more streamlined access to Ethereum’s vast network of developers, dApps, liquidity, and infrastructure.

• Enhanced Efficiency and Scalability

The OP Stack will enable HAQQ to process transactions on a Layer 2 while settling them on Ethereum, drastically improving efficiency. This way HAQQ can significantly scale transaction throughput, reduce fees, and enhance user experience—all while staying true to its core identity that makes it special for its community and users.

• Strategic Alignment

HAQQ will strategically align with Ethereum’s broader scaling roadmap, to scale Ethereum without sacrificing decentralization. This positions HAQQ to contribute to the unified, decentralized future while focusing on its ethical niche, providing the infrastructure needed for DeFi users and protocols seeking ethical solutions.

• Expanded ISLM Utility

The ISLM token will be more accessible, easier to list on decentralized exchanges, allow greater function within Ethereum’s thriving DeFi landscape, and allow easier incorporation into a broader variety of products and services.  Importantly, HAQQ retains its native ISLM token as the gas token, ensuring continuity for users and maintaining its distinct economic model.

In summary, Ethereum remains the heart of Web3 innovation. Many of the most cutting-edge applications, liquidity hubs, and developer tools are built within its ecosystem. By integrating fully into Ethereum as an L2, HAQQ strengthens its legitimacy, accelerates adoption, and ensures it remains at the forefront of blockchain innovation—positioned for long-term success in the decentralized economy and to bring the dream of an ethically centered financial solution to the world a little closer. 

Shariah Oracle Integration into Smart Accounts

• What is the Shariah Oracle?
  The Shariah Oracle is a mechanism that ensures users' interactions with the network comply with Islamic principles (while keeping the network permissionless), a cornerstone of HAQQ’s mission to serve users seeking ethical blockchain solutions.
• Evolution of Integration
  Initially, HAQQ planned to integrate the Shariah Oracle into client-side wallets, requiring individual applications to enforce compliance. However, the approach has evolved to embed these checks directly into smart accounts at the protocol level. This shift ensures universal enforcement of Shariah compliance across all transactions and interactions, regardless of the wallet or interface used.
• Advantages
  Native integration simplifies development, enhances security, and provides users with seamless assurance that their activities align with Islamic values. It eliminates reliance on external tools and strengthens HAQQ’s commitment to ethical standards.

Connecting the Transition and Shariah Compliance

The move to Ethereum L2 via the OP Stack will not only address technical limitations but also empower HAQQ to implement advanced features like the Shariah Oracle within smart accounts. The OP Stack’s flexibility allows HAQQ to embed compliance at the protocol level while benefiting from Ethereum’s scalability and ecosystem. This synergy enhances HAQQ’s ability to deliver a scalable, cost-effective, and Shariah-compliant blockchain, positioning it as a leader in ethical DeFi.

It is also worth noting that by directly connecting with Ethereum L1 and its L2s, HAQQ will be able to expand the issuance of Shariah Oracle certificates beyond its own network, positioning itself as an ethics provider for the entire Ethereum ecosystem.

Why Optimism  

With the proposed transition to Ethereum Layer 2, multiple solutions were analyzed and ultimately Optimism’s tech stack reigned supreme. The OP Stack provides a proven, modular framework that accelerates HAQQ’s transition with minimal technical overhead while ensuring fast and cost-efficient transactions. OP Stack offers a high-performance execution environment with transaction finality backed by Ethereum’s robust security, making it the ideal choice for HAQQ’s mission-driven ecosystem. Additionally, the partnerships that are being struck by the Optimism team dovetail well with HAQQ’s philosophy and long-term growth model. 

Unlocking ISLM Value: Growth, Utility & Expansion  

The migration to Ethereum as an L2 will present a transformative opportunity for ISLM, enhancing its utility, liquidity, and adoption across the Web3 ecosystem.  

• Expanding ISLM’s Reach & Interoperability  

By leveraging Optimism’s OP Stack, HAQQ will become part of Ethereum, seamlessly connecting ISLM with major blockchain ecosystems like Base and Optimism. This ensures that ISLM is no longer isolated but deeply integrated into a broader network of DeFi platforms, applications, and users, driving higher adoption and demand. 

• Tapping Into Ethereum’s Global Ecosystem  

Becoming an Ethereum L2 enables HAQQ to seamlessly connect with Ethereum’s vast industry reach, including gaming, entertainment, finance, and consumer applications. It also enhances interoperability with both the Ethereum mainnet and other L2 networks, allowing developers to build scalable, compliant, and high-impact dApps with ISLM at their core. Crucially as a result of depth in builders, liquidity, and partners, it is very possible to incorporate cross-chain applications with Ethereum and other Layer 2’s. For example, although Firoza Finance may be deployed natively on HAQQ, it may be connected to yield aggregators on Ethereum or Base, allowing liquidity from these environments to flow into Firoza, HAQQ, and potentially ISLM.

• ISLM Positioned for Long-Term Growth  

With interoperability on Ethereum and further DeFi integration, ISLM could become a key ecosystem token, as the beating heart of the HAQQ Network, it is positioned to capture the value of HAQQ’s expansion and success.

The Road Ahead  

Key milestones in this proposed path include:

• Migrating Cosmos modules to the EVM layer
• Launching the public L2 testnet
• Researching and developing liquidity migration solutions
• Exploring new ISLM tokenomics and staking on L2
• Migrating HAQQ L1 mainnet to L2, keeping the original network state

As the core contributor to HAQQ Network and the organization responsible for its development, HAQQ Association is proposing this transition from a Layer 1 network to an Ethereum Layer 2, built using Optimism’s OP Stack.

This proposed transition will drive enhanced scalability and efficiency, all while preserving the core values that define the network. It will propel HAQQ toward rapid, strategic growth and adoption, delivering significant benefits to developers, projects, and users, ultimately adding value to ISLM holders and community.

A community on-chain proposal to gauge sentiment regarding HAQQ's transition to an Ethereum L2 will go live on March 10th, ensuring that all community/stakeholders have a voice. The next phase will be shaped by collective input and refinement.

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We look forward to your participation in this defining moment for HAQQ Network, for bringing ethical innovation to the world!

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