What is Internet Computer Protocol? (ICP)
Summary of Internet Computer Protocol
- The main purpose of Internet Computer is to create a quick and efficient blockchain to rival other platforms.
- ICP is Internet Computer network’s native utility token that is used to facilitate the network’s governance and to reward network participants.
- Internet Computer uses novel technologies such as Chain Key Technology and the Threshold Relay consensus mechanism to run its platform.
- ICP tokens give their holders the power to help shape and govern this new Internet
Internet Computer Protocol is a blockchain network that aims to bring greater efficiency, speed and decentralization to computation and data storage. The project aims to address shortcomings associated with the traditional Internet, such as monopolization of services, poor systems security and misuse of personal data.
Three features differentiate the Internet Computer from other blockchain networks:
- Anyone can create a decentralized application (dApp) on its blockchain platform thanks to a simplified user interface.
- ICP runs on a decentralized network with dedicated hardware established by independent parties rather than a cloud maintained by centralized data servers.
- The blockchain processes transactions quickly, setting it apart from other cryptocurrencies that may take 30 minutes or more to complete transactions.
Internet Computer network’s native utility token, ICP, is used to facilitate the network’s governance, compensate nodes that perform computations and to reward participants for their engagement in its ecosystem.
Who created Internet Computer (ICP)?
Internet Computer was created in 2016 by Dominic Williams.
The Internet Computer blockchain was incubated and launched by the DFINITY Foundation in 2016, a not-for-profit scientific research organization based in Zurich, Switzerland.
Williams first announced Internet Computer in 2015 and conducted several rounds of funding in 2018 raising a total of $195 million. DFINITY currently oversees the growth and development of the Internet Computer Protocol network.
How does Internet Computer Protocol work?
ICP is a network of computers, called nodes, that provide a single platform for applications of any scale or complexity.
ICP provides a unique network architecture that combines these nodes with the following components to achieve its decentralized internet vision:
- Canisters – Special smart contracts that users interact with as part of their internet experience.
- ICP Nodes – Subnetworks used to host canisters.
- Data Centers – Distributed computer networks that host and serve data and applications on-chain.
- Cycles – ICP tokens which are used to pay for computation and resource consumption on the ICP platform.
- Network Nervous System (NNS) – ICP’s governance system that controls, configures and manages the ICP network.
- Neurons – Entitle a participant to vote on ICP’s governance proposals to help shape the network and earn governance rewards.
- Threshold Relay – ICP’s variation on Proof of Stake consensus, which helps validate the network and maintain consensus across its various clients.
Chain Key Cryptography
Chain Key Cryptography is the engine that drives the ICP network, allowing it to add an extra layer of security and data privacy when processing smart contracts and validating transactions.
Since the Internet Computer Protocol is composed of nodes located worldwide, Chain Key is used to ensure the correctness of the information transmitted between these nodes and that the messages received by these nodes originated from the ICP network.
In order for the system to work, each node is given a secret key that allows them to jointly sign messages.
Uniquely, the ICP system only has a single public key which is used by all the nodes to verify and validate any of the information originating from the individual secret keys.
Internet Computer’s Threshold Relay Consensus
To secure its blockchain, Internet Computer created a consensus mechanism called Threshold Relay, a modification of the Proof of Stake (PoS) algorithm.
PoS systems require users to stake their tokens in order to validate transactions on the network. Internet Computer’s Threshold Relay PoS enables nodes that produce a random number referred to as a random beacon (randomly samples replicas into groups), before setting these groups (committees) up for threshold operation. The random beacon number then chooses the current committee, and relays from one committee to another in what is called a Threshold Relay.
Internet Computer’s Threshold Relay consensus is powered by a four layered PoS:
- Identity layer: Provides the registry for all the clients. Open registration is possible through a stake deposit of ICP tokens with a lock-up period.
- Random Beacon layer: Provides a source of randomness through Verifiable Random Function (VRF) for all higher layers including smart contracts.
- Blockchain layer: Builds a blockchain from the verified transactions and is driven by the randomness of the Random Beacon Layer.
- Notary layer: Provides fast finality guarantees to clients in the network and external observers.
This consensus mechanism emphasizes transaction finality by implementing a Threshold Relay technique in conjunction with the BLS signature scheme (a cryptographic signature scheme which allows a user to verify that a signer is authentic) and a notarization method that allows users to reach consensus.
Why does Internet Computer (ICP) have value?
The Internet Computer’s native token, ICP, plays a crucial role in maintaining and operating its network.
For developers, ICP tokens are valuable because they can be converted to cycles, which are used to pay for resource consumption on the network. Canister smart contracts must have an account with cycles available to pay for the communication, computation, and storage resources that the canister’s application consumes. Cycles reflect the real costs of operations for applications hosted on Internet Computer including resources such as physical hardware, rack space, energy, storage devices, and bandwidth. Although cycles are not currency (they cannot be converted back to value in the form of ICP tokens), they can be transferred between canisters to pay for operations.
By owning ICP tokens, users can participate in the platform’s on-chain governance that uses an algorithmic governance system called the Network Nervous System (NNS). The NNS allows participants to lock up ICP tokens in a stake called a Neuron which allows them to submit and vote on proposals that affect the network's operation. The participants are then rewarded in the form of additional ICP tokens.
Internet Computer also incentivizes participants who operate data centers and carry out other maintenance activities such as solving any emerging security needs, assignment of nodes to subnet blockchains and more with newly minted ICP.
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Why buy ICP?
Investors may find Internet Computer attractive based on its goal of creating a blockchain platform for faster transaction settlement time and with theoretically infinite capacity.
ICP’s goal of building a modern internet with the ability to host any scale of application, from DeFi and smart contract applications to tokenized internet services and websites, may also be of interest to those who want to add ICP to their portfolio.
In addition, developers and investors may find the ICP platform appealing for building open internet services that would provide products and services that have the potential to replace centralized big tech companies.
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