Internet Computer Protocol (ICP) is a blockchain network designed to enhance efficiency, speed, and decentralization in computing and data storage. It aims to address various limitations of the traditional Internet, such as service monopolization, inadequate security systems, and the misuse of personal data.
Distinguishing Features of Internet Computer
- User-Friendly dApp Creation: The platform allows anyone to develop decentralized applications (dApps) with a simplified user interface.
- Decentralized Infrastructure: ICP operates on a decentralized network supported by independent parties using dedicated hardware, rather than relying on centralized cloud servers.
- Fast Transaction Processing: ICP boasts quick transaction processing times, setting it apart from many other cryptocurrencies that can take 30 minutes or more to complete transactions.
- Utility Token (ICP): The native token, ICP, facilitates network governance, compensates nodes for computations, and rewards participants for their involvement in the ecosystem.
Founding and Development
The Internet Computer blockchain was created by the DFINITY project, which Dominic Williams founded in 2015. The DFINITY Foundation, established in Switzerland in October 2016, scaled up the project’s research and development efforts. The foundation raised initial funding through a public ICO in February 2017, followed by additional funding rounds in 2018, accumulating over $150 million from prominent investors. The foundation is based in Zürich and operates another center in California,
Internet Computer and Its Functions
The Internet Computer Protocol (ICP) connects a network of dedicated devices to form a “world computer,” enabling the decentralization of Web3 services. This infrastructure helps address privacy issues prevalent in traditional social networks, where user data is often shared with corporations and inundated with advertisements.
Users of decentralized networks built on Internet Computer can log in cryptographically using their device’s security features, such as Face ID or fingerprint sensors. They can store files, share media quickly, and transfer NFTs and cryptocurrencies instantly. These services can make users part owners by distributing governance tokens from a management DAO, incentivizing user engagement and content moderation.
Decentralization and Smart Contracts
Internet Computer allows developers to build fully decentralized online services without relying on traditional IT infrastructure, such as cloud computing services, databases, and web servers. Developers utilize smart contract software called “canisters” that interact with the web and other blockchains without bridges, offering scalable and efficient operations.
The Internet Computer blockchain employs “reverse gas” for smart contracts, meaning the contracts pay for their own computation. Users can create sessions to interact with the blockchain multiple times, authenticating through built-in security features of their devices.
Community DAOs can manage services directly from the blockchain, enhancing security and allowing autonomous protocol operations. Web3 services can reward users with governance tokens for contributing to tasks like content moderation or user referrals, fostering a sense of ownership and community involvement.
Chain Key Cryptography and Subnet Blockchains
The Internet Computer uses “chain key cryptography,” allowing blockchains to create public “chain keys” and sign messages with distributed private key material. This enables verification of artifacts from the blockchain using a single public key, in contrast to traditional blockchains that require extensive data for verification.
The network comprises multiple “subnet blockchains,” which can integrate to increase capacity. These subnets operate transparently to smart contracts, forming a single, scalable blockchain. Applications can verify the authenticity of messages using chain key signatures, ensuring security and proper functioning.
The Network Nervous System (NNS), an advanced DAO, controls the Internet Computer network, instructing nodes on network structuring. Subnet blockchains communicate directly without needing each other’s state, enhancing scalability and efficiency.
Canister Smart Contracts
Canister smart contracts on the Internet Computer are highly versatile, running WebAssembly bytecode and persistent memory pages. They can perform complex computations, including multi-block transactions and automated tasks.
The chain key cryptography framework enables these smart contracts to manage accounts and sign transactions on other blockchains. For instance, Internet Computer smart contracts can create and manage Bitcoin addresses, enabling the development of native DeFi systems for the Bitcoin network. Similarly, decentralized web experiences can be created for Ethereum, with smart contracts handling transactions and querying results via HTTP outcalls.
Token Utility
One compelling reason to master Monero usage lies in its exceptional privacy features. Since transactions cannot be effortlessly tracked on its blockchain, users can confidently engage in various activities involving cryptocurrency transactions. This attribute not only ensures security and anonymity but also contributes to the fungibility of Monero (XMR).Key benefits of Monero include:
- Unmatched Privacy: Transactions on Monero’s blockchain remain private, enabling users to participate in diverse crypto-related activities without fear of exposure.
- Fungibility: Due to its privacy properties, Monero maintains its value regardless of past transactions or involvement in questionable activities, ensuring acceptance across platforms.
- Potential Investment Value: For investors anticipating increased demand for privacy in cryptocurrencies, Monero serves as a strategic asset to diversify portfolios.
- Advancements in Cryptography: By embracing Monero, users contribute to pushing the frontiers of cryptography in digital currencies, fostering global financial freedom without censorship or oppression.
Value Proposition of ICP
The ICP token serves three primary functions:
- Fuel for Computation: ICP tokens are converted into cycles to power smart contracts, creating a deflationary mechanism as tokens are burned.
- Governance Participation: ICP tokens can be staked in the Network Nervous System DAO, creating voting neurons that generate rewards for governance participation.
- Store of Value: ICP tokens can be used in decentralization sales by Web3 services, providing investment opportunities in decentralized platforms.
Investors and developers may find ICP attractive due to its goal of building a modern, scalable internet capable of hosting a wide range of applications, from DeFi and smart contracts to decentralized web services. This potential to replace centralized big tech companies with open internet services presents a compelling value proposition for adding ICP to a portfolio.
Tokenomics of the Internet Computer
ICP Utility Token
The Internet Computer (IC) utilizes a utility token known as ICP. This token plays several critical roles within the protocol:
- Governance Participation: ICP holders can stake their tokens to vote on or submit governance proposals, earning rewards for their participation.
- Resource Payment: ICP can be converted into cycles, which are used to pay for resources on the Internet Computer.
- Node Provider Compensation: ICP tokens remunerate node providers who operate the nodes running the Internet Computer protocol.
- Participation in DAO Token Swaps: ICP can be used in token swaps for decentralized autonomous organizations (DAOs) on the IC.
Additionally, ICP can serve as a medium of exchange for goods and services, including NFTs and subscriptions.
Governance and Voting Rewards
Anyone can participate in the governance of the Internet Computer by staking ICP tokens in neurons. Neuron holders vote on proposals regarding changes to the IC. The voting power of neurons depends on the number of ICP staked and the duration of staking. For instance, setting the staking duration to the maximum of 8 years can double a neuron’s voting power, encouraging decisions that enhance the long-term value of the staked ICP.
Participation in governance increases the maturity of voting neurons, which can then be converted into ICP. The IC calculates a daily reward pot according to a predetermined schedule, distributing it among eligible neurons based on their voting power. Initially, 10% of the total ICP supply is distributed annually as voting rewards, decreasing to 5% over eight years.
As the reward amount is independent of the total staked ICP, lower participation leads to higher rewards. As of November 2022, 266 million ICP is staked, representing 54% of the total supply, with 123 million ICP staked for the maximum period of 8 years, showing strong long-term commitment.
Neurons can be configured for automatic voting, following other neurons’ votes in a system known as “liquid democracy.” Automatically voting neurons still receive full voting rewards, aiding swift and secure decision-making.
Cycles for Computation and Resources
ICP tokens can be converted into cycles, which developers use to pay for installing smart contracts, known as “canisters,” and for the resources these canisters consume (storage, CPU, and bandwidth). The cycle price is pegged to a basket of fiat currencies, making the cost predictable despite fluctuations in ICP’s market price.
“Internet Computer allows developers to build fully decentralized online services without relying on traditional IT infrastructure, such as cloud computing services, databases, and web servers.”
In this “reverse gas model,” developers pre-pay for costs, allowing users to interact with dApps without needing tokens or seed phrases. The stable cost of cycles ensures developers can anticipate their expenditure on computation and storage.
Node Provider Rewards
ICP tokens remunerate node providers who own and operate the nodes running the Internet Computer protocol. These rewards are newly minted ICP, determined by the node’s location and specifications, and are fixed to cover costs. Rewards are specified in XDR and converted to ICP based on the average exchange rate over the past 30 days.
Investing in the IC Ecosystem
The Internet Computer offers a plug-and-play solution for developers to transfer control of their dApps to DAOs and raise funds through decentralization swaps. Users can commit ICP to a new DAO, receiving DAO tokens in return when the swap completes. The ICP funds raised are retained within the DAO to cover future computation needs and pay for code bounties.
Decentralization swaps in DAOs provide transparency and access to Web3 projects, fueling the growth of the IC ecosystem.
Development of Total Supply
The Internet Computer features both inflationary and deflationary mechanisms. Governance participants can convert voting rewards into newly minted ICP, and node providers receive ICP rewards. Conversely, ICP is burned when converted into cycles to pay for computation and storage.
Shariah Opinion
The ICP Token can be considered Shariah compliant as there are no impermissible use cases. The Internet Computer Protocol has genuine use cases.
Conclusion
Based on and subject to the foregoing information, and for the purposes of this conclusion, nothing has come to our attention that causes us to believe that ICP is in breach of Shariah* principles and rulings as adopted by the scholars conducting this research.
*Your Attention is drawn to the term ‘Shariah’ and ‘Shariah compliant’ and its interpretation thereof as expressed in the following link https://shariyah.net/glossary/
