Internet Computer Protocol: A Case Study
Overview and Origin
Name: Internet Computer Protocol (ICP)
Incorporated: 2015
Headquarters: Zurich, Switzerland
Founder: Dominic Williams under the non-profit DFINITY Foundation
Central Idea: A decentralized blockchain network aiming to extend the functionality of the public internet, allowing it to host backend software, transforming it into a global compute platform. ICP aspires to become the "AWS of Web3," replacing legacy IT and cloud infrastructure with a more efficient and decentralized alternative.
Initial Funding: The project began its fundraising back in 2017, where they've raised more than $100M by the end of 2018. On May 7, 2021 the team went live with their mainnet, while the ICP token was publicly launched a few days later on May 10, 2021. Key investors include Andreessen Horowitz and Polychain Capital.
Business Activities
Purpose: ICP’s primary utility is to create a seamless, scalable, and secure environment for building, deploying, and operating decentralized applications (dApps) and services directly on the internet. According to founder Dominic Williams, ICP is an attempt at building a world computer that is “trying to reinvent computing itself”.
Users: ICP targets developers, enterprises, governments, and consumers looking to leverage blockchain technology for building decentralized solutions.
Competitive Advantages: ICP offers the ability to build web-scale applications with lower costs and enhanced security compared to traditional cloud services. It provides a decentralized alternative that eliminates the need for legacy IT, thus reducing dependency on tech giants like Amazon, Google, and Microsoft. ICP enables applications to run at web speed with efficiency and without relying on centralized servers.
Scalability: Unlike Ethereum, which struggles with high gas fees and slower transaction times during peak usage, ICP can process transactions in parallel through its subnet architecture, providing significant scalability. This allows ICP to handle a higher volume of transactions with lower latency, making it more efficient for large-scale applications.
Technologies implemented
• ICP operates using Chain Key Technology, which divides the network into subnets that can process transactions in parallel, enhancing scalability. This technology removes the need for bridges by enabling direct interactions between different blockchains through advanced cryptography. Chain-key tokens, such as Chain-Key Bitcoin (ckBTC), replace traditional wrapped tokens by performing all operations on-chain via smart contracts without involving off-chain intermediaries. For each ckBTC token, a real bitcoin is held on-chain by a canister smart contract, offering stronger security.
• Internet Identity: ICP introduces Internet Identity, a blockchain-based authentication system that enables users to interact with dApps securely without needing traditional usernames and passwords. This enhances security and user experience by providing a single, universal identity across the network.
• Canister Smart Contracts: ICP utilizes canister smart contracts, which are highly efficient and scalable. These smart contracts can store large amounts of data and execute complex computations, making them ideal for building sophisticated dApps.
Landscape
Domain: ICP operates in the blockchain, decentralized applications, and internet services domain.
Trends & Innovations: ICP’s innovation in enabling a decentralized internet. It challenges traditional cloud computing and aims to revolutionize internet infrastructure by providing an open, decentralized, and tamper-proof environment.
Relevant Competitors: Other blockchain platforms like Ethereum, Polkadot, and Solana, as well as traditional cloud service providers, are all major competitors.
Results
Impact: ICP has made significant strides in promoting the adoption of decentralized technologies. Its launch attracted widespread attention, and it continues to grow its ecosystem of developers and projects.
Success by Metrics: ICP consistently ranks among the top 25 blockchain projects by market cap and developer activity. The network’s ability to attract high-profile partnerships and projects underscores its potential.
Performance: The ICP token has experienced volatility, reflecting the speculative nature of the cryptocurrency market. However, its technological advancements and growing ecosystem, signified by the growing number of existing canisters, suggest a promising future.
Recommendations
While ICP’s vision of a decentralized internet is compelling, it faces competition from established blockchain networks and traditional cloud providers. To strengthen its position, ICP should continue to enhance its scalability solutions, foster developer engagement through incentives, and expand its partnerships with enterprises and governments looking for enhanced cybersecurity measures.
Criticisms and Improvements: One significant drawback is ICP's tokenomics. The token has an infinite supply, which can lead to concerns about inflation and long-term value. Additionally, the current deflationary token burning mechanism has been argued as insufficient to offset the inflationary pressures, leaving much to be desired in terms of maintaining the token's value. To improve this, ICP could implement more effective deflationary measures to users and investors. Moreover, a change in marketing strategies to better onboard new users and explain the benefits of ICP’s technologies would help increase its user base and adoption rate.
By addressing these areas, ICP can further solidify its role as a leader in the decentralized internet space and continue to drive innovation in blockchain technology.
Sources
https://messari.io/project/internet-computer/profile
https://coincodex.com/ico/internet-computer/
https://support.dfinity.org/hc/en-us/articles/360057605551-What-is-chain-key-cryptography