TL;DR: With a new update or project being released almost every day, it’s clear the crypto ecosystem is constantly evolving. Internet Computer has gone through a lot of ups and downs to reach the level it’s at today — but it’s just the beginning. Knowing what brought it here and why it was created will lead you to make better decisions when investing or simply using Internet Computer.
In this article, we’re gonna dive into the Internet Computer ecosystem, answer all the $ICP related questions and even more. Prepare yourself for a history lesson and a journey to the future of Internet Computer!
What is Internet Computer (ICP)?
The Internet Computer is a Layer 1 blockchain created in 2015 by Dominic Williams. It is a smart contract platform that can operate at web speed and offers indefinite scalability.
Scalability is defined as the amount of transactions that the Internet Computer can process per second, or throughput. Crypto dogma dedicates the more decentralized a network is, the lower its scalability. This is the case with networks like Bitcoin and Ethereum, who process about 5 and 17 TPS respectively.
DFINITY Foundation recognized that a blockchain network needs to run efficiently at scale while staying true to the decentralization ethos. The Internet Computer introduces some novel adaptations to the protocol.
The concept of blockchains is not new, and Internet Computer is one of many such networks. The idea started in 2008 with the release of Satoshi Nakamoto’s Bitcoin Whitepaper. This kicked off the subsequent creation of many different types of networks under the same “blockchain” terminology.
Despite being similar in concept blockchains have all different architectures and use cases. What all have in common — including Internet Computer — is that they have to be secure. Security is the ability of a blockchain to prevent attacks and penalize malicious actors. This is usually done through their consensus algorithm and the mechanism they use to reach finality.
Over time many different mechanism have been designed, ranging from Proof of Work, Proof of Stake to novel ones called Proof of Spacetime. Each one hopes to achieve the best way of securing the network they are built for. The consensus mechanism that Internet Computer uses is called Threshold Relay, a heavily optimized version of Proof of Stake.
Proof of Stake means that Internet Computer gets its security from validators that stake $ICP to secure the chain. This is different from Proof of Work blockchains, where miners replace the role of validators.
The Internet Computer uses four layers to guarantee the security and scalability of its blockchain: Identity Layer, Random Beacon Layer, Blockchain Layer, and Notary Layer.
As the name suggests, the Identity Layer registers identities in the network so they can be appropriately sanctioned for malicious behavior. Anyone can register on the network through a security deposit with a lock-up period. This layer prevents malicious actors from creating multiple pseudonymous accounts to spam the network. In blockchain terms, it’s called Sybil resistance.
The Random Beacon Layer is at the core of the network’s security. It provides an unmanipulable source of randomness to support a fast and scalable consensus layer. The random beacon output selects the next set of validators randomly. As a result, validators are chosen automatically, allowing for a high-speed random beacon and low block time.
The Blockchain Layer is where the blocks are registered. Similar to the Proof of Work model, the heaviest chain is the most preferred.
The Notary Layer is the highest layer of the consensus protocol and provides the extremely quick finality of transactions across the network. Once the notary layer receives the proposed blocks, it runs the ranking mechanism for them, selects the highest ranked block, and subsequently signs and broadcasts it to the network.
Finality is achieved when a block has been created and is now immutable, meaning that nobody can change the date inside. Using the four layers described above, ICP achieves a finality of under 2 seconds.
Internet Computer has been created with the goal of being an alternative to Ethereum, the second most popular blockchain after Bitcoin. The Ethereum network has been created in 2014 and introduced the concepts of smart contracts. These are small applications that run inside a virtual machine called the Ethereum Virtual Machine. The EVM allows for a blockchain to process more than simple token transfers. To give more info, it opened up the possibility to run applications in a decentralized manner.
Applications usually run in the cloud or on your computer, so running them on a blockchain was unheard of at the time. This makes them uncensorable (nobody can stop them) and ensures they’re always online — as long as the chain they run on is processing transactions.
Internet Computer is based on a different VM architecture. While similar to Ethereum in terms of functionality, it implements some new improvements.
The first one is a concept called Internet Computer subnets, released in 2021 by the DFINTIY Foundation. Subnets are sovereign networks that get their security from the root Internet Computer (ICP) chain.
Sovereign means they are separate and do not occupy space on the main Internet Computer network. Because they are separate, they can have their own rules while also benefiting from shared security.
Subnets are natively interoperable across the broader Internet Computer ecosystem, this is how they differ from an entire separate blockchain. This brings advantages to both the subnet as well as the main Internet Computer (ICP) chain, which is relived from extra transactions. Running multiple independent subnets in parallel allows the Internet Computer to break through the single-blockchain paradigm.
The second one is how native IC smart contracts are functioning. The smart contract software used to run smart contracts is called “canisters”. Once deployed, end-users can interact with the canister through a frontend client such as a browser.
On the Internet Computer, smart contracts pay for their own computation aka. “reverse gas.” This model enables users to interact with Dapps without having to pay for gas. Instead, developers fill the canister. Costs are stable, and they are measured in cycles. The process requires developers to convert their ICP tokens into cycles, which fuel the Dapp.
Using such system has many advantages. By setting limits on how many cycles a canister can consume, the platform can prevent malicious code from completely taking over resources.
Another benefit is that cycles make the cost of operating a dapp predictable. The conversion rate of ICP to cycles is adjusted accordingly, based on the current ICP market value.
Internet Computer is powered by the ICP token, a central part of the Internet Computer ecosystem.
Interestingly, the inflation of ICP is unknown. The Internet Computer inflation rate sits currently at around 4% and gets lower every year.
The protocol ensures that the token inflation decreases in the first 8 years from 10% to 5% where it stays stable. But that’s not the entire picture, because while the total supply inflates through NNS rewards it also deflates because ICP is turned into cycles and then burned for computation.
Another factor is that these parameters can be changed through the NNS so the inflation rate may become less or more in the future.
The Internet Computer has no maximum amount of tokens that can be created. As of 2022, the circulating supply is around 280 million ICP tokens, while the total supply is 488 million ICP.
For more details about how you can earn more Internet Computer by running a validator node at home check out our Internet Computer Mining & Staking guide. It includes the exact steps and best methods of earning more crypto like $ICP in 2024 and beyond.
When was Internet Computer (ICP) created?
The Internet Computer (ICP) was created during Dominic Williams’ deep dive into the world of blockchain. Work began on the Internet Computer in 2015, but before that, a couple of important events happened. Most events revolve around the DFINITY CEO and Founder, Dominic Williams.
The first meaningful event is Dominic’s invention of the Threshold Relay consensus. Formalized in 2016, the Threshold Relay technique enabled for decentralized, deterministic randomness which granted the security of the Internet Computer blockchain.
The core concept of the consensus was part of a proof of concept called “Pebble.” Between 2014 and 2015, Dominic spend most of his time studying how to make blockchains more efficient. Most blockchains were copies of Bitcoin, running on Proof of Work consensus.
The problem was that networks were limited in scalability, which made it difficult to integrate blockchains to consumer apps. Dominic managed to solve the decentralization/scalability/security trilemma by implementing his unique technique.
In simple terms, the threshold relay mechanism samples the validator groups (called committees), and chooses the next committee based on a set of operations. The process of relaying from one committee to another is called the threshold relay.
Using this mechanism, the network can process transactions much faster because the agreement is automatic. Moreover, the randomness involved in selecting the next committee ensure the network stays secure.
The Internet Computer was one of the first major crypto projects to implement a Proof of Stake consensus mechanism. It is purposefully designed to scale to an unlimited capacity, theoretically.
Explaining his idea to the Bitcoin community was close to impossible, let alone explaining it to the VCs. Because of these circumstances, Dominic’s project remained at a theoretical level until he decided to pursue the idea further 2 years later.
Another meaningful event was the creation of the Network Nervous System (NNS).
When designing the protocol, the DFINITY team decided to learn from other projects’ mistakes, and implement failsafe mechanisms from preventing history repeating itself. Dominic mentioned several events that inspired the design of NNS: exchange hacks like Mt. Gox and Bitfinex, the DAO faulty systems, DDoS attacks, market fluctuations, the forming of assassination markets, and so on.
To sum it up, DFINITY had the complicated mission to mitigate hacks in case they occurred, fixing broken systems like The DAO using arbitrary code, facilitate transparent protocol upgrades, and create balance in terms of participation. Their solution was to create an autonomous “master” blockchain which manages everything from economics to network structure, hence the name Network Nervous System, or NNS.
An important factor was for the protocol upgrades to occur automatically, meaning Dfinity or any other developer couldn’t singlehandedly take a decision in the name of everyone. To give users autonomy, the network is split into smaller chains, called neurons. Each neuron makes a security deposit to the Network Nervous System. This creates a strong incentive to contribute to good decision making since if the NNS makes poor decisions the value of $ICP stuck inside neurons is likely to fall.
The NNS is in a way similar to Internet Computer’s subnets, Comsos’ zones and Polkadot’s parachains. They enable for the blockchain to achieve scalability by orders of magnitude and incentivize users to follow the network rules.
The economic design of the NNS flowed into the $ICP tokens. As more neurons are created, more $ICP gets locked, which in turn increases the security, capacity and performance of the blockchain.
The first version of the NNS was launched in 2017 with the Copper version. With a clearly defined mission and a consensus model to differentiate itself, DFINITY had two private token sales. The first one netted $61 million, while the second fund raise netted $102 million. Some of the biggest contributors were a16z and Polychain Capital.
To help attract early users, DFINITY conducted an airdrop of 35 million Swiss Francs worth of tokens to the ICP members.
Who created Internet Computer (ICP)?
The Internet Computer was created by Dominic Williams during his research in the blockchain field.
Dominic Williams is a serial entrepreneur born in Great Britain. He founded several startup and now serves as the CEO of Dfinity. He works on the underlying protocol that powers the Internet Computer along with the rest of the Dfinity members.
Dominic Williams studied at King’s College London between 1992 and 1995, where he graduated with a bachelor’s degree in computer science. In the following years, he started building his own startups focused on technology.
In 1998, he created an online storage platform called Smartdrivez. Long before DropBox was launched, Smartdrivez was a pioneer of digital compression technology, which made if efficient to transfer files over dialup connections. Their plan was to partner with Energis, Europe’s largest internet service provider, but the dot com crash led to Energis collapsing. As a result, Smartdriverz couldn’t take their online storing solution to the masses. Later on, DropBox took over this segment.
His next startup was System 7, a Software-as-a-service (SaaS) platform for creating and operating high-end commercial Web portals. The business turned out to be in demand, with high profile companies and governments using the service. System 7 was in business for ten years, time during which Dominic pioneered tools of integrating with community systems such as voting features, algorithms for optimizing lists, and so on.
Between 2010 and 2013, Dominic Williams worked as the founder of “Fight My Monster,” an MMO game that grew to millions of players around the world. Incidentally, the underlying infrastructure helped pioneer several distributed computing technologies including the Cassandra database. Two weeks after the launch, Fight My Monster had 300,000 players and within a year it grew to 1 million players. In the beginning, the venture was financed by Dominic alongside two angel investors. Starting its second year, they’ve received backing from several entire backers.
His first contact to the world of blockchain came in 2013 as he was researching for ways to integrate crypto to his game. With millions of players, Dominic figured that crypto would be an excellent medium for exchanging digital goods. The game studio could then get a share of the transaction fees.
Dominic looked into several cryptocurrencies that claimed to be much faster than Bitcoin. His research led to the realization that most cryptocurrencies lacked the necessary infrastructure to operate at global scale. By February-March 2014, he resolved to create a completely new cryptocurrency. After four months of intensively studying Byzantine fault tolerant consensus protocols, he came up with a proof-of-concept called “Pebble.”
To solve this challenge, Dominic Williams had teamed up with Artia Moghbel, who later became the Chief Operating Officer at DFINITY. He has extensive experience as an entrepreneur, blockchain enthusiast and venture capitalist. Artia Moghbel served as the COO of DFINITY until 2021, when he decided to return to his career as a VC.
Artia Moghbel had previously invested in Dominic’s startups, and they could both see the opportunity that blockchain presented. Their motivation was to build a consensus protocol that could do much more than simple peer-to-peer transfers. For example, they envisioned a protocol that could do micropayments and on-chain automatic transfers.
A challenge at the time was that blockchain technology was unknown to the majority of the people. The Bitcoin community was very dismissive of any alternative consensus protocols. In their mind, Satoshi solved the Byzantine General’s Problem, which made it hard to promote new consensus protocols.
On the other extreme, the venture capital community was completely new to blockchain concepts. They either imagined hat network effects would mean Bitcoin would dominate or they weren’t comfortable getting into this space.
By the end of 2014, it was clear that the Pebble effort wasn’t going to raise any funds. However, Dominic wasn’t taken aback. In 2015, he continued to pursue his research until he came up with a unique protocol called Threshold Relay. To dive deeper, Dominic saw that he could create this sequence of random numbers that was totally unmanipulable — no attacker could actually interfere with the sequence. This made Threshold Relay highly fault tolerant and unpredictable.
Later on, Dominic’s work on Threshold Relay turned out to be one of his biggest scientific discoveries. This is the moment he realized that is should be possible to create a decentralized cloud that hosts the world’s software and data —from that moment, DFINITY project was born.
Until 2016, DFINITY was still a private project. In the meantime, Dominic had co-founded String Labs, an incubator for crypto projects. One of the projects he was involved in was Mirror Labs, an early pioneer of decentralized finance, aiming to create "mirror assets" on the Bitcoin blockchain. Their technique was to apply concepts similar to the Lightning Network.
His most impactful work at Mirror Labs was the proof-of-concept for a decentralized marketplace for mirror assets. Unfortunately, the tech was too early, and the prospect of regulatory challenges stopped them from pursuing the idea.
In that moment, Dominic had pitched DFINITY project to the team at String Labs. And so during the summer of 2016, String Labs started putting some money in and they’ve built their team.
Dominic gives credit to several people at String Labs who helped establish the DFINITY Foundation. Their names are Tim Hankey, Mahnush, and Tom Ding. The latter was a co-founder of String Labs and he had an important contribution in getting DFINITY off the ground.
However, Tim decided to leave DFINITY in 2018, as he was more interested in life extension technology than blockchain. According to one of his colleagues a DFINITY, he gradually became less involved in the project. By then, DFINITY had already evolved into a much bigger team, and his impact became lesser.
How is the Internet Computer (ICP) token used?
The Internet Computer token is the native token for the Internet Computer network. Most assets in the Internet Computer ecosystem are denominated in ICP, which makes it the default unit of account.
ICP is the fuel that powers transactions and block creation on the Internet Computer chain. We sometimes refer to it as “gas”. Its primary use case is securing the network and keeping actors aligned to the same principles.
Making a transaction on the Internet Computer network requires a small fee in ICP, usually around 6 cents. Because Internet Computer has a quick time to finality and processes more transactions per second the gas fees quickly add up. This small fee is paid by users and goes to validators for doing their work.
ICP tokens are important because they can be converted to cycles that, in turn, are used to pay for resource consumption. Cycles reflect the real costs of operations for applications hosted in the Internet Computer blockchain including resources such physical hardware, rack space, energy, storage devices, and bandwidth.
Cycles are not a currency — they cannot be converted back to value in the form of Internet Computer Protocol tokens, but can be transferred between canisters to enable canisters to pay for operations.
The Internet Computer is currently listed on multiple exchanges. The major ones are
The Internet Computer empowers developers to design new applications and tooling to support the Internet Computer ecosystem without being hindered by proprietary infrastructure or the limitations of conventional blockchains.
Besides offering funding, DFINITY Foundation is looking to expand its internal team. Some of the open positions are in brand designing, engineering, research and accounting. If you are interested to become a contributor to the protocol, you can participate in online events such as conferences or in-person events such as meetings.
Governance of the Internet Computer protocol is done on-chain via the Network Nervous System. The NNS acts as a decentralized autonomous organization (DAO). This means token holders have a say in the direction of the protocol by voting on proposals. Token holders can vote to upgrade or modify the Internet Computer protocol, change the monetary policy, or even the governance itself.
While other blockchains take weeks or months to upgrade (called hard forks) and typically require substantial manual work and coordination to do so, the IC upgrades itself on a weekly basis. Because of the frequency in voting, token holders can choose to vote automatically by following the votes of a group of neurons.
Anyone can stake ICP inside the Network Nervous System (which governs the Internet Computer) to earn new ICP in the form of voting rewards. When ICP is staked, it creates a neuron that can vote on proposals that update, manage, and configure the network, which are executed automatically. So far, the Internet Computer community has voted on more than 50,000 proposals.
What are the latest updates on Internet Computer (ICP)?
Internet Computer in 2021
2021 was Internet Computer’s mainnet year. The mainnet had been created a year prior, in December 18, 2020, and was announced quietly by Dominic Williams. Although the platform was fully functional and decentralized, Dominic referred to the release as an alpha.
As such, only a fraction of the 469 million governance tokens has thus far been issued. These are held by DFINTIY Foundation, early investors and several other parties who will vote the remaining tokens into existence once the requirements for Genesis have been met.
These requirements include the release of huge amounts of source code and documentation, along with ongoing security and stress testing as the network scales. With Genesis, which was anticipated to happen in the next two to three months, the network would transition into beta.
After five years in the making, the ICP tokens have finally been released on May 11. Over four hours, ICP reached an all-time high of $750 before going down to $250. In the next month, ICP was trading for around $100 before falling to $60.
Some community members alleged that DFINITY has dumped almost $6 billion worth of ICP since the token became tradable. Redditors claimed that insiders dumped their tokens while small investors were blocked from accessing their ICP tokens.
Dominic Williams confirmed that the DFINITY Foundation’s tokens were not vested and were instead earmarked to lock for staking on the network. Williams has also denied allegations that the founders dumped tokens and carried out the activity. His reaction led to the project losing its credibility.
Internet Computer in 2022
The current year has been a powerful one for Internet Computer. One of the most awaited features was the integration of IC with the Bitcoin blockchain aka the Chromium milestone.
On May 2, the team deployed the replica on a testnet, enabled the Bitcoin integration, and synced the entire Bitcoin testnet. Once the system has been confirmed to work as intended, the team plans to enable the Bitcoin API and make it publicly available for testing and development.
The beta release of the Bitcoin network integration has been announced on August 4. The final version will deliver smart contracts for Bitcoin on the highly scalable Internet Computer blockchain.
An essential attribute of this direct Bitcoin integration is that it is “trustless”. The implementation does not require any additional parties that need to be trusted for security or for the integration’s availability, and therefore does not have single points of failure.
The Bitcoin integration enables Internet Computer canisters to hold bitcoin addresses and function as wallets that can hold, receive, and send BTC. Bitcoin smart contracts can be securely developed around native bitcoin, and can hold their own bitcoin keys natively and securely.
Internet Computer is in a constant growth cycle, and network participants like us can earn more $ICP without too much hassle or technical knowledge, right from the comfort of our homes.
Learn how to do that in our Internet Computer Mining & Staking guide, which includes the exact steps and best methods of earning more crypto like $ICP in 2022 and beyond.