What is Internet Computer Protocol (ICP)?

Internet Computer Protocol, known by its acronym ICP, is an innovative blockchain technology designed to expand the functionality of the traditional Internet. Mainly developed by the organization DFINITY, founded by Dominic Williams, this project aims to decentralize the Internet and create a more open and autonomous cyberspace.

For that, ICP seeks to generate a new type of Internet and a decentralized computing platform that allows developers to create and host web applications and services securely and efficiently, without the need for traditional servers or cloud infrastructure managed by centralized providers. In this way, we seek to generate an alternative that is more resistant to censorship and failures compared to current centralized solutions.

Project beginnings

The development of the Internet Computer Protocol project began around 2016. Since then, DFINITY has been working on Internet Computer Protocol technology, with the aim of expanding the functionalities of the Internet and providing a decentralized platform for applications and services.

With that vision, Internet Computer Protocol seeks to address the following elements:

• Decentralization. In a world where a few tech giants dominate the internet space, DFINITY sought to create a system that allowed for true decentralization, distributing power across multiple parties rather than concentrating it.
• Scalability. Solve the problem of scalability in blockchain networks, allowing applications and systems to run at web speed without sacrificing security or decentralization.
• Compatibility. Facilitate the creation of decentralized applications (dApps) and traditional web services in a blockchain environment, opening the doors to a new generation of Internet applications.
• Costs reduction. Offer an alternative to centralized cloud services that could reduce infrastructure costs for developers and businesses.
• Simplifying smart contract technology. Improve smart contract technology to make it more accessible and easier to use for developers, to encourage greater adoption and creation of decentralized services.
• Data autonomy. Allowing users and organizations to have full control over their data, countering the current trend of large corporations to accumulate and monetize personal data.

The Internet Computer Protocol seeks to create an environment in which any developer in the world can build and host applications without the need for traditional servers, eliminating dependence on centralized infrastructures and promoting a new way of using the web that is more secure, private and efficient. The official launch of the Internet Computer Protocol mainnet took place in May 2021.

Key Features of ICP

What makes ICP especially innovative is the introduction of a number of various features that differentiate it from other blockchain solutions. Among these innovations we can highlight:

Network Nervous System (NNS)

The Network Nervous System (NNS) is one of the central and innovative components of the Internet Computer Protocol (ICP). This system acts as a decentralized and autonomous governance mechanism that manages the entire network. As a result, the NNS is responsible for a variety of key functions that keep the Internet Computer running efficiently and allow it to adapt and evolve over time.

NNS Main Functions

• network governance. The NNS system is in charge of managing proposals and votes within ICP. To do this, network participants can make proposals for changes or updates to the network. These proposals are voted on by ICP token holders, who have the power to influence the direction and policies of the network. This voting system follows a democratic mechanism, where each ICP token grants one vote, and decisions are made based on the results of these votes.
• Resource management. NNS also has an important role in assigning ICP nodes and subnets, and therefore controlling the resources available in ICO. To do this, the NNS manages the configuration of subnets and the assignment of nodes to optimize network performance and capacity. In this way, NNS ensures that resources are distributed equally and scales the network by adding or removing nodes as necessary.
• Automatic Updates. The NNS can automatically deploy updates to the network without the need for a fork, maintaining cohesion and avoiding divisions in the community. In addition, this system also monitors network status and performs maintenance tasks to ensure uninterrupted operation.
• Network economy. NNS is also responsible for controlling the different economic parameters of the network. These elements include the creation of computing cycles, which are used to feed computing power and storage within the network. Additionally, it is also responsible for controlling the system's rewards, distributing them among participants and validators within the network.
• Network monitoring and security. NNS is also responsible for constantly monitoring the network for malicious behavior and can take steps to mitigate attacks or security issues. For example, this system is responsible for allowing only trusted nodes to join the network, through a verification and authentication process.

How does the NNS work?

To achieve all of the above, the NNS system uses a liquid democracy voting scheme, which is a hybrid between direct and representative democracy. In this system, ICP token holders can vote directly on proposals or delegate their votes to other participants who they consider more informed or aligned with their interests.

For a proposal to be approved, it must reach a specific quorum and a majority of votes. The voting structure and decision thresholds may vary depending on the nature of the proposal.

The NNS is crucial to the autonomy and decentralized approach of the Internet Computer Protocol (ICP). By not relying on a centralized authority to make decisions, the network can adapt quickly and respond to the needs of its community in a more organic and democratic way.

Reverse Gas Model

Another of the great key features of Internet Computer Protocol (ICP) is the so-called Inverse Gas Model. This model is a transaction fee approach that deviates significantly from the “gas” model used by blockchains like Ethereum.

To understand it we must remember how "gas" works in networks like Ethereum and similar. In these networks, users who initiate transactions or execute smart contracts must pay a gas fee to compensate for the computational cost that their transaction implies for the network. This gas rate fluctuates depending on market demand and network congestion, which can sometimes result in high and unpredictable costs for users.

However, as its name suggests, this dynamic is reversed in the ICP Inverse Gas Model.. Instead of users paying for each transaction or smart contract execution, the developers or deployers of the applications (dApps) are the ones who assume the operating costs. This is achieved by pre-loading the dApps with a balance of “cycles”, which are consumed as the application operates and processes transactions or executes smart contract logic.

How does this model work?

This model works thanks to a series of steps among which we have:

• Pre-financing of Smart Contracts. At this point, developers acquire ICP tokens and convert them into cycles. These cycles are mapped to canisters (a form of smart contracts in ICP) that host the logic and state of the dApps.
• Cycle Consumption. When a canister executes operations, such as transactions or calculations, it consumes cycles of its pre-funded balance. The rate of cycle consumption depends on the operation: data storage, state management, and computational processing have associated costs in cycles.

Thanks to this model, end users have great advantages as they can interact with dApps without worrying about transaction fees, facilitating a better user experience and potentially greater adoption. Additionally, the Reverse Gas Model also allows transactions and interactions with the dApp to be predictable for users, because they are not subject to real-time gas price fluctuations.

For their part, developers also obtain certain advantages. This can be clearly seen in the fact that this model allows them to manage operating costs in a more predictable and efficient way, since the cycles have a fixed cost. This incentivizes developers to write efficient code, as cleaner, more optimized code will consume fewer cycles, reducing costs.

Canister Smart Contracts

Canisters are one of the key innovations in the Internet Computer Protocol (ICP) architecture and represent an evolution in the concept of traditional smart contracts. They are autonomous and secure software containers that encapsulate both the code of smart contracts and the state they maintain. The canisters are designed to run on ICP's decentralized infrastructure and enable the building of Internet-scale applications and services.

Canister Features

Among the main characteristics of the canisters we have:

• Autonomy. Each canister is capable of executing code and managing data autonomously, without the need for manual intervention, making them ideal for creating decentralized applications (dApps).
• Storage capacity. In addition to containing executable code, canisters also store and manage their own state. This means they can retain information between runs and do not rely on external storage.
• Cycle management. Canisters use “cycles” to fuel their operations, including compute, storage, and other network resources. Cycles are a measure of resource consumption in the ICP network.
• Scalability. The canisters are designed to be highly scalable, thanks to the underlying ICP network structure that can grow based on demand.
• Interoperability. Canisters can communicate and interact with each other, making it easier to build complex systems and integrate services.
• Error tolerance. They run in a fault-tolerant environment, meaning that if a node in the network fails, other nodes can take over to ensure service continuity.
• Updates. Unlike some traditional smart contracts that are immutable, canisters can be updated with new code, allowing applications to improve and evolve over time.

Canisters vs traditional Smarts Contracts

Internet Computer Protocol (ICP) canisters are this network's equivalent to traditional smart contracts, like those we see on Ethereum, they are forms of programs executable on blockchain platforms, but they have several key differences in their design, capabilities, and underlying philosophy. .

First of all, canisters have the ability to be updated after being issued. This feature allows developers to fix bugs and add new features over time, addressing the challenge of immutability in traditional contracts. This is something that cannot be done with traditional smart contracts. All this without giving up the ability to function in a decentralized manner and without management by trusted third parties.

Another important difference between canisters and traditional smart contracts is that the former have the ability to maintain and manage their own state efficiently, which is an integral part of their design, allowing for more complex and stateful applications. In this way, canisters can be used to contain any type of application you can imagine, from DeFi applications, to decentralized social networks, wallets, and more. And this while maintaining great performance thanks to the use of WASM as a programming platform.

Additionally, the canisters are designed to be infinitely scalable. To do this, they only need to add more nodes to the network, which can potentially lead to better performance and lower costs for their operations.

In short, containers expand the concept of traditional smart contracts by offering greater flexibility, scalability, and direct integration with the Internet. They are designed not only to support decentralized applications, but also to provide the infrastructure necessary for a decentralized Internet ecosystem.

How does Internet Computer Protocol work?

The operating structure of the Internet Computer Protocol is quite elaborate, and consists of a series of subsystems that together allow the operation of this enormous blockchain network. In general, ICP developers describe the operation of this network in the following parts:

Nodes and Subnets

Internet Computer Protocol is designed to function as a series of networks and subnetworks that interconnect with each other in order to provide the resources and connectivity necessary for the operation of its applications and services. So we have:

• Independent Nodes. The network is made up of numerous independent nodes operated by different people and organizations around the world.
• Subnets. Nodes are organized into subnets that can process transactions and execute canisters simultaneously and in a distributed manner, increasing processing capacity and fault tolerance.

Canisters

As we mentioned before, canisters are the spaces where ICP applications are developed and deployed, and they are responsible for maintaining two major functions within ICP:

• Software containers. Developers deploy canisters, which are self-contained software containers that contain executable code and its associated state.
• Computing cycles. Canisters use “cycles” to perform operations, which act like gas in other blockchain systems, but with a predictable cost.

Consensus and Completion of Transactions

ICP has a consensus mechanism that allows nodes to agree on the messages to process, as well as their ordering. This system is what allows each of the nodes and subnetworks to communicate with each other and works in a coordinated manner.

Thus, the purpose of the ICP consensus protocol is to generate the same block of ordered messages at each node in a subnet in a given round so that each node can perform the same state transition by executing those messages deterministically. Additionally, unlike other blockchains, ICP aims to have transaction completion times that resemble the response times of traditional web applications.

Integration with Traditional Internet

Finally, another important part of ICP is that it is designed for interoperability and scalability, not only with other blockchains, but also with the traditional Internet. This means that ICP is not only able to communicate with the different parts of its network, but with other blockchains and maintain differentiated use of resources.

Likewise, canisters are not only capable of executing application logic (backend), but they can also deliver content directly to users, acting as decentralized web servers.

In summary, ICP is a blockchain platform that seeks to extend and transform the current Internet by allowing the creation and hosting of software directly on the network in a secure, fast and decentralized manner, offering an alternative infrastructure to traditional cloud and server systems.

Native ICP Token

The ICP token is the native token of the Internet Computer Protocol (ICP) and performs several essential functions within the network. Below are the main functionalities and uses of the ICP token.

Totken functionalities

• Network Governance. ICP token holders can submit and vote on governance proposals that influence the direction and updates of the network. Additionally, the ICP token is used within the NNS to participate in decision making that affects the operation and evolution of the Internet Computer.
• Transaction Facilitator. Although the reverse gas model means that developers pre-fund canisters with cycles, ICP tokens can be used to acquire these cycles needed for transaction processing and smart contract execution.
• Participation Rewards.  Nodes that are part of the network and run canisters receive rewards in ICP tokens for their contribution to the security and processing of the network. The same system also applies to NNS, as users can “lock” their ICP tokens in “neurons” to participate in governance and, in return, receive rewards in the form of additional tokens for their active participation.
• Conversion to Cycles. ICP tokens can be converted into cycles, which are the consumable resource that powers computing and storage in canisters.
• Cost Predictability. The fixed conversion between ICP and cycles allows developers to more predictably manage the operating costs of their applications.
• Economic incentives. The economic incentives of the ICP token are designed to align the interests of the various network participants with those of the proper functioning and growth of the Internet Computer.
• Creation of Markets.  ICP tokens can be bought and sold on secondary markets, providing liquidity and enabling speculation and price discovery. In this section it is important to highlight that the issuance of ICP tokens is inflationary and has no issuance limits.

The ICP token is therefore an integral piece of the Internet Computer economy and governance, providing a means to participate in the network, manage resources and receive rewards. Its design seeks to promote a decentralized and autonomous ecosystem that enables a new way of building and maintaining software on the network.

Conclusion

In short, Internet Computer Protocol (ICP) represents a significant advancement in blockchain technology and a bold step toward reimagining Internet infrastructure. With its novel focus on canisters for hosting decentralized applications, ICP promises a platform capable of supporting not only financial applications, but an entire spectrum of web services on a global scale. The integration of decentralized governance through the Network Nervous System (NNS) and the innovative use of the ICP token for staking and resource management underscores the project's commitment to decentralization and autonomy.

ICP's capabilities to deliver canister upgrades, a reverse gas model for a frictionless user experience, and potentially unlimited scalability present a compelling case for developers and users alike. Additionally, ICP's ability to serve content directly to end users may eventually challenge the current paradigm of centralized servers and cloud services.

As the world moves towards increasing reliance on digital solutions, Internet Computer emerges as a promising platform that seeks to democratize access to Internet infrastructure, reduce censorship, and ensure continuity of services in a secure and resilient environment. However, ICP's long-term success will depend on adoption by the developer community, the robustness of its technology, and its ability to maintain a vibrant and engaged ecosystem. Like all innovations in the crypto space, ICP will face challenges and opportunities, but its vision and ambition position it as a key player in the continued evolution of the decentralized Internet.