What Is Internet Computer (ICP) Crypto?

By Brian Nibley · March 15, 2022 · 4 minute read

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What Is Internet Computer (ICP) Crypto?

Bitcoin achieved decentralization of monetary value via a decentralized peer-to-peer cash system. The Internet Computer Protocol (ICP) hopes to accomplish something similar with the internet itself.

The goal of ICP crypto is to create a decentralized internet. Rather than having a handful of centralized servers host much of the crucial infrastructure — as is the case today — ICP envisions a new internet run by independent data centers the world over.

ICP crypto plans to run their protocol on millions of different computers. This new, decentralized internet could be an alternative to cloud services like Google Cloud and Amazon Web Services that currently power large swaths of the internet.

The developers behind ICP crypto claim that their network has several advantages over the centralized model.

How Does ICP Work?

The full details and answers to the question “what is ICP and how does it work” can get quite complicated. In order to understand how ICP works, it helps to have an elementary understanding of how blockchain works.

The Internet Computer runs on a blockchain protocol known as Internet Computer Protocol (ICP). Its network consists of a kind of tower made of building blocks. Independent data centers lie at the bottom, hosting specialized hardware nodes.

The nodes combine to create subnets, and the subnets host something called canister smart contracts. These are smart contracts that can be uploaded by users. The creators of the project hope that in eight years’ time, there will be billions of canisters running ICP.

A high-level overview of the protocol might look something like this:

Data centers (foundation) > Nodes > Subnets > Canisters (final end product)

Network Nervous System

A unique element of ICP is what’s known as the Network Nervous System (NNS). This is a system that controls, configures, and manages the network. Data centers that would like to join the network must apply to the NNS. The NNS has an open governance system, but it also oversees permissions for those wanting to participate in the network.

The NNS performs a variety of tasks necessary for managing the network. Chief among these is monitoring nodes for deviations from expected behavior, which could point to nodes performing poorly or malfunctioning in some way.

NNS and ICP Crypto

The NNS also has an important role to play in the token economy of the ICP. New ICP tokens are generated by the NNS to reward nodes and neurons that cast votes inside the NNS, which determines which proposals get submitted to the protocol. The issuance of these new ICP tokens is inflationary.

At some point, owners of data centers and owners of neurons can exchange their ICP crypto tokens with those who own canisters. Those who own and manage canisters can then convert their tokens into cycles, which can be used to charge canisters.

When canisters perform computational tasks or store information in their memory, they burn through cycles and at some point, must be recharged with additional cycles to continue with their tasks. This process is deflationary.

Subnets

One concept that deserves further explanation is subnets. Subnets are the building blocks of the ICP network. A subnet hosts a specific subset of software canisters hosted by the network. A subnet gets created as a result of several nodes coming together from different data centers.

This process is governed by the NNS. The nodes work together through the ICP to replicate the computations being carried out by the network canisters they host.

Who Created ICP?

ICP was created by a company called the DFINITY Foundation and a developer named Dominic Williams. The DFINITY Foundation is a nonprofit that was created to research and develop the Internet Computer, with the goal of creating a more open internet. Founded in 2016, it has 188 employees around the world and three research centers.

The ICP crypto project launched in May 2021 after several years of research. Researchers from around the globe contribute to the foundation’s work, including cryptographers who hold upwards of 200 patents and 100,000 academic citations.

ICP Coin Need-to-Knows

The Internet Computer Protocol has ambitions to create an entirely new, decentralized internet. ICP crypto is only one part of that burgeoning ecosystem.

The ICP token itself has a few use cases, including:

•   Governance

•   Rewards for participating data centers

•   Payment for transaction fees

In a sense, it can be said that the Internet Computer Protocol converts crypto to processing power. Its network calculates a fee based on how much computing power a developer’s project will require. The website will run on the protocol so long as the fee is paid.

It’s thought that developers can create and run any kind of application on the Internet Computer.

This could include things like social media networks like Facebook and Twitter, software like all the apps we know and use today, and even some new kinds of apps that have yet to be discovered.

As one example, developers working on ICP have published the code for a social media app called “CanCan,” which they say is like a decentralized version of TikTok.

The Takeaway

What is ICP crypto? In a nutshell, the protocol is an elaborate smart contract platform designed to outcompete platforms like Ethereum and take on the challenge of creating an entirely new internet infrastructure.

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FAQ

Is Internet Computer decentralized?

The Internet Computer Protocol is thought to be more decentralized than the current internet, which many have criticized as being a monopoly run by a handful of large technology companies. At the same time, some also criticize projects like ICP as being centralized tech projects, given they are created and managed by a central team who could, in theory, make unilateral decisions affecting the protocol at any given time.

How does ICP coin work?

ICP crypto works primarily as a method of payment for running programs on the Internet Computer Protocol. There are also other uses, such as governance and rewarding data centers who participate in the protocol.

Is Ethereum a replacement for the internet?

Ethereum is a platform for programming and running smart contracts. It doesn’t currently serve as a replacement for the internet and would be unfit to do so at this time. Gas fees are only one of many significant hindrances to this, as users have to pay very high fees to perform simple tasks. ICP crypto is thought to be a competitor to Ethereum and has hopes of one day replacing the current internet.


Photo credit: iStock/Nattakorn Maneerat

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