Dfinity (ICP) is a blockchain project attempting to build the first-ever world computer at internet scale. That’s where Dfinity’s Internet Computer nomenclature comes in — it refers to a public blockchain network upon which anyone can build anything without using centralized clouds like AWS.
If the possibility of a truly decentralized world computer — think of a public supercomputer — excites you like few new ideas have, you are not alone. When Dfinity emerged in 2015 proposing to build just such a network, investor, developer, and community interest flooded in with reckless abandon. After all, who wouldn’t want a piece of the next Internet?
After raising over $160 million from early investors, founder Dominic Williams assembled an all-star team of 215+ members from the world’s top tech, academic, and leadership talent. In the following years, Dfinity teased revolutionary breakthroughs, a community-focused token airdrop, and promises to reshape cloud computing.
Now that we’ve entered 2022, where do Dfinity and the Internet Computer stack up? This guide explains in easy terms what Dfinity is, how the Internet Computer works, and everything to know about the ICP cryptocurrency token.
What is Dfinity?
By now, you should know that a blockchain is a distributed ledger system for recording transactions. Generally speaking, blockchains are decentralized, though centralized versions for enterprise use are becoming increasingly common.
Understanding what Dfinity is should come a little easier with that in mind. Dfinity is a blockchain network aiming to realize an internet-scale version of decentralized computing. In other words, imagine using an open, peer-hosted internet that didn’t live on centralized clouds, servers, and through corporate providers.
Essentially, Dfinity’s beef with the current blockchain paradigm is that it provides peer-to-peer transactions but little else. For instance, that cool NFT you bought on OpenSea? Yeah, well, even though the token itself is in your Metamask wallet and lives on-chain, the artwork is stored on Google Cloud. Ditto for other entire blockchains, like Flow.
The problem with this arrangement is even if your token is nice and snug on a decentralized chain like Ethereum, its content, such as metadata, artwork, and more, is not. At any given moment and for reasons beyond your control, Google, Amazon, and even IPFS can restrict access to content you thought was yours.
Dfinity asks, what if blockchains stored data and scaled computations too? In reply to its question, the Internet Computer was born. Sometimes called the ‘IC’ for short, the Internet Computer goes far beyond Bitcoin and Ethereum. It potentially introduces a blockchain that runs as fast as the internet while providing an entirely open tech stack to drastically reduce the barriers to entry faced by developers locked into Facebook, Google Play, Apple’s App Store, and other platforms.
Additionally, opening a decentralized tech stack that performs on par with centralized counterparts means third-party developers can build what they want instead of being repressed by the limits imposed by giant tech gatekeepers.
When Dominic Williams founded Dfinity back in 2016, he responded to the apparent limits inherent to Ethereum’s design. At the time, Ethereum was positioning itself as an early world computer but lacked both performance and capacity for the task (and still does to this day). Williams thought businesses would jump at the chance to dramatically reduce the costs associated with using big IT cloud stacks since he envisioned the Internet Computer cutting out seemingly endless intermediary chaff.
From this point, it’s easy to see why the Dfinity Foundation needed to raise so much money. To accomplish its goals, the foundation set out to build its network of research centers for spearheading development and data centers to host network nodes. Today, there are 417 node centers around the world operated by the Dfinity Foundation and the wider community.
How the Internet Computer Protocol works
In the previous section, we introduced Dfinity — but that’s only the business entity and foundation, not the protocol itself. The Internet Computer Protocol is where the blockchain magic happens, but as you might have imagined, it’s rather complex, so let's break it down into simple details.
To begin with, the IC network is currently logging 51 blocks per second for a rate of just over 2,000 transactions per second. To compare, that’s about on par with Visa Network transaction speeds.
You can quickly contrast these figures with Bitcoin (7 tx/s) and Ethereum (15 tx/s) to glean a rapid conclusion that the Internet Computer is not only fast but lightyears ahead of other blockchains. How does the Internet Computer accomplish such speeds and performance?
Motoko programming language
First off, everything that happens in the Dfinity ecosystem occurs through code. However, not all programming languages are the same — and sometimes a programming language doesn’t exist for an intended use case. That’s why Dfinity developers went ahead and created Motoko, a language specific to the Internet Computer designed to support its features.
Using Motoko, developers can build canisters, which is another term Dfinity has coined for bundles of smart contracts and their data. Additionally, Motoko is designed to handle asynchronous messages efficiently. Asynchronous messaging refers to messages that don’t require both parties in a conversation to be present. Think of texting — you can send a text to someone even if they aren’t on their phone at that very moment, and they can reply later (even if you aren’t on your phone then either).
The key point to grasp in understanding what Dfinity offers is that the project sees itself as extending the internet scope by scaling in important blockchain features. You might call such a design Web 3.0, but Dfinity just calls it the Internet Computer.
But where is this computer hosted? At its base level, the IC is hosted by a distributed network of data centers which each host the requisite hardware for running an ICP node. So, in a sense, it’s fair to refer to data centers and nodes interchangeably, since they amount to the same thing. Right now there are just under 500 nodes but that number is expected to increase dramatically in 2022.
When nodes build consensus about blocks with each other, the association of nodes is called a subnet. In fact, because subnets are associations of nodes hosting smart contract canisters (i.e., Dfinity apps), it’s entirely logical to view them as independent blockchains themselves that are in association with other chains (subnets) and the overall ICP governance structure.
In traditional blockchains like Bitcoin, 51% of nodes, or miners, are required to agree before appending a block to the blockchain. The Internet Computer, however, doesn’t require such blanket coordination between a majority of nodes and subnets. Instead, the Network Nervous System, or NNS, handles the assessments over how to combine nodes, subnets, and canisters in real time.
Network Nervous System (NNS)
How does the Internet Computer build consensus while scaling to internet-and-beyond demands? It uses the Network Nervous System, an algorithmic governance system that:
Manages a coalition of token holders (staking their tokens in neurons)
Creates subnets according to the network’s scaling needs
Deploys network upgrades decided by voting
Determines who can participate in voting (using a governance canister)
Essentially, the NNS is a form of artificial intelligence that modulates the entire Internet Computer protocol as resources wax, wane, and conditions change. This helps keep the network safe but it scales the network’s applications effectively whether there are 500 or 5,000,000 node machines.
Coordinating nodes by adding and subtracting them in real-time is a complex task driven by two canister sets — governance and registry canisters. The latter keeps track of the Internet Computer’s entire configuration at any given moment including which canisters are managed by which subnets, and which nodes compose each subnet.
Dfinity use cases
The Internet Computer has an impressive amount of technology under the hood, including a seemingly-alive governance and resource management layer and a globally-distributed network of data centers running node machines. What can you do with all of that technology at your fingertips?
Today, Dfinity hosts a diverse array of powerful blockchain applications. Some of them, like the Uniswap front-end, are familiar DeFi apps many of us know from Ethereum. The same goes for NFT platforms like Entrepot.app. However, the Internet Computer is at its best and most interesting for edge and emerging use cases like Web3 web hosting on Fleek, end-to-end decentralized social media like DSCVR, and distrikt, a community-owner version of LinkedIn.
The Internet Computer Protocol token (ICP) is a governance token used to stake, propose, and vote on measures via the NNS. It’s also the base token for Cycles — a separate stablecoin that pays for and powers the network’s computational processes.
Staking ICP tokens inside neurons
Dfinity likes to give functions many of you are already familiar with different, and often obscure, names. Case in point: neurons.
Essentially, a neuron is the container within the NNS holding your staked ICP tokens. Once you stake your ICP, the neuron locks your tokens in and allows you to participate in governance matters. The more you vote, the more participation rewards you get. Therefore, if you don’t want to personally maintain a level of activity to reap rewards, you can delegate your ICP tokens to other, more active neurons.
Something to be aware of is withdrawing ICP tokens from neurons is not an instantaneous process. When you stake into a neuron, you set a length of time during which your tokens remain locked. As time progresses, the lock decays, allowing you to withdraw tokens bit by bit until they’re fully unlocked at the decay’s finish (the date you originally set for unlock).
The locking mechanism introduces a way to boost your voting power with less tokens. In a nutshell, the longer you lock your tokens (up to eight years), the more voting weight they carry. Longer decays resulting in more powerful locked tokens also results in increased rewards.
Converting ICP to Cycles for computational power
A facet users are sure to love about the Internet Computer is it’s developers, not end users, who pay network fees. On Ethereum and other blockchains, both parties pay fees, requiring end users to always have the network’s native token in a wallet to cover the costs of interacting with the ecosystem.
Instead, Internet Computer users don’t need ICP in a wallet to use the network’s various apps. Developers prepay for the computational units they anticipate their application will use by converting ICP to Cycles, then paying for the computational units with the latter. This framework resembles how the internet works today, so for the end user, it feels familiar right out of the box.
Dfinity’s Internet Computer is a bold play toward a future vision of an open, permissionless internet. If Dfinity can deliver on its vision, it’ll also trouble the static and rudimentary (by comparison) smart contract blockchains we know today. But short of wiping them out, outdated blockchains will become specialized canisters within the Internet Computer network.
The question is, canDfinity do it? So far, the foundation has been plagued by insider trading lawsuits stemming from the shocking ICP sell off that took the token from values north of $400 to just $20 in less than a year. That brutal downward pressure took attention away from the project’s technical merits — but it’s important to note that the Dfinity team is highly capable and is, perhaps, one of the brightest in blockchain.
That’s why Dfinity, the Internet Computer, and the ICP token are well worth watching in the months and years to come. Should the network come through on even a fraction of its ambitions, it’ll reshape the way we connect, share, and do business forever.
About The Author:
The Shrimpy Team
The Shrimpy Team is comprised of highly experienced content writers who analyze and research the latest market trends, delivering content suitable for both beginner and veteran crypto investors.
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