Internet Computer (ICP)
Most recent update: [June 26, 2023]
What is Internet Computer?
What if the bandwidth of the entire world wide web was used to power one giant computing platform? That is what Internet Computer (ICP) and its creators, the DFINITY Foundation, aim to do. Internet Computer is a decentralized blockchain network whose goal is to push the boundaries of internet functionality and to support smart contract development at a massive scale. As an open-sourced crowd computing platform, it is designed to address some of the major challenges faced by our modern internet today, including poor system security, the monopolization of internet services, and the misuse of personal user data.
Internet Computer’s derivative token, ICP coin, powers the network by being used as both a governance token as well as literally being used to power the network as a fuel for computations (more on this later).
Who is behind Internet Computer?
Internet Computer and the Internet Computer Protocol were developed by the DFINITY Foundation, a non-profit based out of Switzerland. Its key person is Dominic Williams, who is the founder and chief scientist of DFINITY. As a crypto theoretician, he is responsible for inventing the Threshold Relay, Probabilistic Slot Consensus, and other crypto theories. He is well-ingrained in the cryptocurrency industry, having been an early member of both Bitcoin and Ethereum’s technical communities. Other projects he has been a part of include String Labs, of which he was President and CTO, Mirror Labs, of which he was an early pioneer, as well as being the founder and CEO of Fight My Monster, a children’s MMO that scaled to millions of users.
The DFINITY Foundation itself is a premier scientific research organization that comprises some of the world’s top cryptographers and distributed systems and programming language experts. Collectively, they are responsible for nearly 100,000 academic citations and 200 patents. Some notable technologists at DFINITY include Jan Camenisch, a world-renowned cryptographer who led IBM’s cryptography and research department for nearly two decades, and Andreas Rossberg, the co-creator of WebAssembly and the brain behind Google Chrome’s V8 engine.
How does it work?
The Internet Computer is built on a decentralized protocol known as Internet Computer Protocol (ICP), which combines the collective computing power of a great amount of nodes, producing a unified platform capable of supporting applications of massive scale and complexity. What ICP also allows is software running on the internet in a distributed manner rather than on servers owned by large companies. This means that developers can create applications that no single entity owns, controls, or censors, introducing the potential rebuild of internet services in an open and decentralized fashion.
DFINITY claims that ICP is highly scalable and runs at web speed, with many functions taking mere milliseconds to compute. To achieve this, ICP is different from blockchains like Bitcoin or Ethereum in that participating nodes must meet a minimum hardware specification, so not every computer or machine can simply run a node.
Unlike other blockchains that utilize nodes for validation purposes, nodes on ICP host subnets; these subnets are a segment of the blockchain that can be integrated with other blockchains. These subnets are similar to NEAR Protocol’s shards, and allow the network to handle a greater amount of transactions without compromising efficiency. And, rather than use a traditional Proof of Stake consensus mechanism to process transactions, subnets instead interact with each other using what is known as chain key technology, which essentially finds redundancies within blocks in the system to update smart contract states.
Smart contracts are segregated into secure units known as canisters, which function as individual applications and are able to store more data than a traditional smart contract. While complicated in its technology, it actually simplifies usage for the end user as they can interact with these canisters much like how they would interact with internet applications today.
In order for a subnet to power a canister, the protocol uses a gas-equivalent dubbed as a cycle. These are generated by using ICP tokens and, unlike Ethereum’s gas which increases during high transaction periods, the value of cycles remain constant. This means that ICP tokens have a central role in actually powering the network. Cycles can reflect costs such as storage or bandwidth, and are burned when they are used.
The ICP Token and tokenomics
While there were around 470 million ICP tokens created during Internet Computer’s launch, there is no hard cap to the number of coins that can exist. This is due to the token’s role in upkeeping the network, as coins are constantly being created and burned to use as cycles to fuel the Internet Computer Protocol.
Apart from powering the network, ICP tokens are also used for governance in a system that DFINITY calls the Network Nervous System (NNS). The NNS is functionally a decentralized autonomous organization (DAO) in which token holders can participate in influencing the direction of the protocol by voting. Like other DAOs, users need to lock up ICP tokens for a period of time to participate. This staking period culminates in the creation of a ‘neuron,’ which essentially allows the participant the right to vote while also earning governance rewards. The amount of influence and governance rewards is directly proportional to the amount of tokens that a user locks. Neurons can also delegate voting to other neurons of their choice. Rewards are also delegated to data centers that offer their services to the network.
The modified PoS consensus mechanism utilized by the Internet Computer Protocol features robust security as it contains four layers. These layers enable provable security and resistance to many known attack vectors while retaining full decentralization and allowing the network to scale up to millions of participants.
Drawbacks and risks
Internet Computer offers revolutionary technology and functionality when compared to its peers. Much of its value comes, however, from the potential of this technology. When the project launched in May 2021, it made a huge splash and hit an all-time high of $750. Looking at its price chart, however, a keen investor can see that the token’s price is trending tremendously lower than it was at launch. It has many competitors in the industry as a developer’s blockchain platform, primarily with Ethereum, and, while it offers many benefits to Ethereum in its current form, many users may potentially shy away from ICP once Ethereum 2.0 has been realized.
It should be noted that while the two are fundamentally blockchain platforms catering to dApps, they are focused on two different functionalities; Ethereum is focused primarily on asset movement and Internet Computer on Web3 applications. Investors should take the time to fully understand the benefits of Internet Computer and its protocol, as the value of the ICP token mainly hinges on its utility for the network’s upkeep.
Before listing ICP on the VirgoCX Platform, VirgoCX performed due diligence on ICP and determined that ICP is unlikely to be a security or derivative under Canadian securities legislation. VirgoCX’s analysis includes reviewing publicly available information on the following:
- The creation, governance, and location of ICP and/or its primary development team;
- The supply, demand, maturity and liquidity of ICP; and
- Legal and regulatory risks associated with ICP.
Statutory Rights under Securities Legislation
VirgoCX is offering Crypto Contracts on crypto assets in reliance on a prospectus exemption contained in the exemptive relief decision Re VirgoCX Inc. dated May 30th 2022 (the Decision) (the Decision). Please be aware that the statutory rights in section 130.1 of the Securities Act (Ontario) and, if applicable, similar statutory rights under the securities legislation of each other province and territory in Canada do not apply in respect of the Crypto Fact Sheet to the extent a Crypto Contract is distributed under the prospectus relief in the Decision.
To learn more about the technology behind Internet Computer, check out these in-depth resources here:
CoinMarketCap’s Internet Computer deep dive
Internet Computer on Gemini
Internet Computer on CoinCentral
Internet Computer on Coinbase
Internet Computer on CoinDesk