What Is ICP Crypto? Internet Computer Protocol Explained

Key Takeaways

• The Internet Computer Protocol (ICP) aims to decentralize the Internet, removing control from centralized entities like ISPs and big tech companies. 
• Developed by the Dfinity Foundation, founded by Dominic Williams in 2016, ICP officially launched in May 2021. It introduced smart contracts and partnerships with major blockchain projects.
• ICP runs on a distributed network of nodes and subnets, offering decentralized applications (dApps) that operate at web speed.
• The protocol excels in speed, scalability, and low transaction costs compared to traditional blockchains but faces challenges in widespread adoption, competition, and regulatory uncertainty.

The Internet of today is controlled by centralized entities. More or less all the activities you access online rely on a small handful of internet service providers (ISPs), cloud computing services, and big tech companies. It’s no secret that this tiny cluster of entities has major control over user data and can freely apply censorship. 

ISPs and tech giants act as gatekeepers of the Internet, dictating what users can access, how data is stored, and who profits from it. Why should you cede control of your data, or accept the possibility of your accounts being shut down? What if instead, you had full control over your data in a fully decentralized blockchain environment?

That’s the idea behind the Internet Computer Protocol. In this article, we’ll take a look at Internet Computer Protocol, how it works, what it aims to achieve, and its pros & cons.

What Is Internet Computer Protocol (ICP)?

The Internet Computer Protocol is a blockchain network designed to decentralize the Internet. It builds upon Ethereum’s “World Computer” ambitions, seeking to take things a step further and become the Internet Computer – we’ll explain the difference shortly.

The project’s underlying goal is to move away from the centralized structure that currently dominates the web, and use blokchain as the foundation of a decentralized alternative, giving control back to users and developers. 

ICP aims to build an open, secure, and scalable internet that operates without the need for traditional centralized cloud services and ISPs. The protocol operates on a public blockchain that allows developers to build decentralized applications (dApps) and smart contracts. But unlike traditional blockchains, ICP’s platform is designed to run at web speed and scale. 

The ultimate goal of ICP is to reimagine how the Internet functions, enabling anyone to build decentralized websites, services, and platforms. This in turn would make the internet more secure, transparent, and resilient.

History and Development of ICP

ICP officially launched in May 2021, but the seeds of the project were sown much earlier.

The project’s parent organization, Dfinity, was founded in Zurich in 2016 with the mission of creating a more open and secure internet. The Dfinity foundation is something of an elite organization, consisting of around 200 of the world’s most talented developers.

Spearheaded by networking expert Dominic Williams, Internet Computer Protocol was Dfinity’s flagship project in the quest for a fully decentralized Internet. This enormous project was made possible by a huge round of initial funding, both from VC’s and an IPO, with ICP receiving an estimated $160 million to help it launch. Among the initial investors included big VC firms such as Andreessen Horowitz and Polychain.

Since its launch, the protocol achieved significant milestones such as integrating smart contracts and establishing powerful partnerships. To name a few, Dfinity has joined forces with the United Nations Development Programme, digital asset custody provider Copper, CV Labs, and others.

How Does ICP Work?

Let’s start by discussing what makes the project unique.

ICP is far from the first blockchain to pursue a decentralized internet – titans like Ethereum and Solana have spent years developing Web3 ecosystems. But where most smart contract blockchains only decentralize the application layer, ICP aims to replace the whole internet stack with blockchain infrastructure. It not only provides a platform for building dApps, but also provides decentralized hosting, challenging the current monopoly of cloud providers like Google, Microsoft, AWS and Alibaba. This makes ICP the only projects aspiring to a fully decentralized Web.

It deploys an internet network using blockchain, running on a distributed network of data centers known as “nodes.” These nodes work together to form “subnets,” which are the building blocks of ICP’s infrastructure. Subnets allow ICP’s internet to scale efficiently while maintaining a high level of decentralization and security. The protocol also introduces the concept of “canisters,” which are similar to smart contracts but more powerful. 

Canisters enable developers to create dApps that can run directly on ICP’s blockchain, removing the need for centralized cloud services like AWS or Google Cloud. In other words, this leads to true decentralization as no single entity controls the underlying infrastructure of the internet.

The key players in the ICP ecosystem include node operators, developers, and users. Accordingly, node operators maintain the network, developers create dApps, and users interact with the network through decentralized applications. All of this is incentivized by ICP token, the Internet Computer Protocol’s native currency. Moreover, it plays a crucial role in network governance, staking, and enabling transactions on the platform. 

ICP vs Internet – A Comparison

The Internet Computer Protocol represents a shift in how the internet operates, moving from centralized control to decentralized autonomy. In the table below, you can see a comparison between ICP and the traditional internet:

Key Features of ICP Crypto

The Internet Computer Protocol stands out for its impressive speed, scalability, and low transaction costs. These features make it particularly well-suited for building decentralized applications at scale. These features give ICP the advantage over other cryptocurrency projects:

• Speed: Unlike traditional blockchain networks, which can be slow and inefficient, ICP can process transactions and computations at web speed, up to 30,000 transactions per second. As a result, dApps run as quickly as their centralized counterparts.
• Scalability: ICP’s unique architecture allows it to scale without the same limitations faced by many traditional blockchains. Furthermore, the subnet system ensures that the network can grow as more nodes join, without sacrificing performance or security.
• Low Transaction Costs: Transactions on the ICP network are inexpensive, making it an attractive option. Consequently, developers and users who want to avoid the gas fees on blockchain platforms like Ethereum will find a much cheaper alternative with ICP.

How Does the Internet Computer Differ From Other Crypto?

But what makes ICP different from the competition? ICP sets itself apart from other cryptocurrencies in several key ways. 

First, its primary goal is to restructure the internet, rather than simply serve as a store of value or medium of exchange or a base for decentralized finance (DeFi) and smart contracts. At the same time, ICP’s goal is to create a decentralized internet where applications can run directly on a blockchain network.

Unlike other blockchain platforms, ICP allows dApps to run at web speed and scale. This enables developers to create applications that rival centralized platforms in terms of performance. 

ICP’s specific architecture makes it more resistant to outages and censorship. Furthermore, there’s the ICP coin, which exists to incentivize activity on the network and fuel the decentralization of the Internet. All participants in the ICP network have to use the native coin in one way or another.

Use Cases and Applications of ICP

The use cases for ICP extend far beyond just cryptocurrency transactions. In other words, developers can build decentralized websites, social networks, and even DeFi projects on the ICP blockchain. Some real-world applications of ICP include:

• Decentralized Websites: Developers can use ICP to create websites that are hosted directly on the blockchain. This eliminates the need for centralized hosting services.
• Decentralized Apps (dApps): ICP allows developers to build scalable and efficient dApps that offer services like decentralized finance, gaming, and social media.
• DeFi Projects: The ICP ecosystem supports DeFi projects, allowing for decentralized lending, borrowing, and trading.

Furthermore, developers can start building on ICP by utilizing its canister smart contract system, which allows for the seamless development of decentralized applications.

ICP Crypto Tokenomics

The ICP token is the native cryptocurrency of the Internet Computer Protocol. As such, it has several vital roles within the ecosystem:

• Network Governance: ICP token holders can vote on proposals and changes to the network, giving them a say in the future of the protocol.
• Staking: Holders can stake their ICP tokens to bolster network security and earn rewards.
• Transaction Fees: ICP tokens pay for transactions on the network, including running dApps and smart contracts.

When it comes to ICP’s tokenomics, the maximum supply is sitting at 522 million with 470 million tokens already in circulation. Out of the 470 million, 239 (46%) are staked. The network uses a deflationary mechanism: tokens used for paying transaction fees, buying compute and storage, or making proposals, all get burned. Users can see the amount of burned ICP on the ICP Dashboard.

The tokenomics of ICP ensures that the network remains decentralized and incentivizes participants to contribute to the health and security of the protocol.

Is ICP Crypto Secure? Risks Involved

While ICP has some clear advantages that make it an appealing alternative to platforms like Ethereum, it also carries some risks. Some of the main concerns include:

• Centralization Risks
• Adoption Challenges
• Regulatory Uncertainty

Centralization Risks

Despite its goal of decentralization, the Dfinity Foundation plays a major role in ICP’s development. This could raise concerns that the platform may not be as decentralized as it claims.

Adoption Challenges

ICP is a relatively new platform, and while it has gained attention, it must compete with well-established platforms like Ethereum. Achieving widespread adoption could be a significant challenge.

Regulatory Uncertainty

Blockchain technologies are still in a gray area when it comes to regulation. Any future legal changes could impact ICP’s growth and adoption.

Closing Thoughts

The Internet Computer Protocol is an ambitious project that aims to decentralize the Internet and build a new web infrastructure powered by blockchain. Within the next decade, the team of developers behind ICP are aiming for it to provide a viable alternative to the internet we currently know.

With its blazing speed, high scalability, and low transaction costs, ICP has the potential to revolutionize the web. However, it faces different challenges, from adoption hurdles to potential regulatory uncertainty. Only time will tell whether the internet will make a major shift towards blockchain technology.

About the author

Tasho Tashev

Tasho is a passionate enthusiast of all things blockchain, Web3 and cryptocurrency. With a keen interest in the cutting-edge intersection of technology and entertainment, he loves sharing stories that inform and inspire.

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