On the morning of Tuesday 11/05/2022, a new currency appeared in Coinmarketcap and took the position of 8th most valuable crypto in the world by overcoming DOT, Bitcoin Cash and Litecoin. In addition to stealing the scene from traditional currencies, ICP was listed on Coinbase and Binance quickly. What is this mysterious coin and how does it work?
History of ICP
Despite the token negotiations started on Monday (10), the Dfinity Foundation has been working on the creation of this cryptography since October 2016. The non-profit organization was created by Dominic Williams and has a mission to “reinvent the internet” as a computer that securely hosts software. To accomplish this mission, the team was able to raise $ 160 million from one of the most successful ICOs in history. Since then, Dfinity has started the development of a complex project.
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How does the ICP network work?
As a recent Messari report explains, the Internet Computer (IC) is less about building an immutable ledger and more about building an open access Internet. While TCP / IP is the protocol that takes billions of people connecting via the internet, the IC is the protocol that allows developers to build applications directly on the internet. The idea is similar to Ethereum in this sense.The infrastructure behind this blockchain is based on the powerful data centers that host nodes, which in turn communicate with the "Internet Computer" to create consensus on the network. These nodes support canisters (a kind of evolution of smart contracts), supporting the creation of programs, websites, decentralized applications and various functions.
Operation of the ICP economy
The network economy works based on the ICP token, stablecoins and cycles. The ICP is the governance token and is useful for the operation of canisters.
ICP serves for governance
This token is for users to vote on the governance of the network. As with other blockchain voting schemes, it is necessary to leave the token staking (stuck in the protocol) to participate in the polls. As a result of the polls, participants earn ICP rewards just for participating. It is also possible to delegate the voting function, as is the case with protocols such as Nano and EOS. This voting system at ICP is called NNS (Network Nervous System, in English) However, unlike the assets mentioned, you can earn more by guaranteeing a longer-term stake for the network. When committing it will not be possible to remove the tokens until the deadline expires, however it is allowed to increase the commitment to the network. Currently, the term of this commitment is a minimum of 6 months and a maximum of 8 years.
ICP will reward nodes
Another function of the token will be to reward network operators, such as Data Centers according to their location.
Use for burning cycles
However, it is not just inflation that the token is made of. It will be destroyed by running smart contracts. ICP can be exchanged for “Cycles”, the price of ICP / Cycles will depend on market factors (supply and demand). The governance network, however, will always convert 1 ICP into 1 SDR which will be equivalent to 1 trillion cycles. Here, we have an essential difference between this network and Ethereum. While in the latter, the user pays a fee to interact with the smart contract, in ICP the developer pays the cycles to pay for the computational units. In short, the canister creators (kind of smart contract) buy the ICP and burn it for finance user computing. As a result, applications can be built without the user knowing that they are interacting with a blockchain.
Important curiosity: Use of IMF global currency
“All proposals provide information in 'real time' about the market value of the ICP, as measured by a Special Drawing Right (SDR) of the International Monetary Fund (IMF), which allows the NNS to convert ICP into cycles (computational power) at a rate that keeps its real cost constant. ”, says the project.
The SDR is a financial asset created by the International Monetary Fund to serve as an international monetary reserve, it is based on a basket of currencies that is regulated according to several criteria. During the 2008 crisis, the Chinese government demanded improvements in that currency to allow for an easy exchange between dollars and SDR.
ICP drops 40% since launch, is it pure hype?
The token certainly brings innovations to the digital assets market, has strengths and weaknesses and has an extremely attractive proposal. However, the market is still pricing the token's usefulness and most likely investors who bought it before launching are realizing their profits while retailers bet on the novelty. The ICP has dropped 40% since its launch, even though the currency has almost $ 50 of market cap and a volume of 1,772,863,454 billion dollars in the last 24 hours really impressive. But the investor must be careful to invest more than he can afford to lose in such a new project. Other bets from Ethereum competitors also attracted a lot of attention, but today they are not highlights, such as NEO, EOS and several others. We have not yet touched on all points of this token, and we have not assessed its centralization and other important aspects for many investors. To stay on top of news on the crypto market, follow Cointimes on Telegram. Text written by Neto Guaraci with the collaboration of Gustavo Marinho.