Colloquially referred to as the Ethereum of South Korea, ICON is an ambitious project which seeks to “hyperconnect the world”. A lot has changed since we last covered the project.
In just the last few months, ICON has finally revealed its blockchain interoperability protocol and made many other leaps in development. These have moved the project significantly closer to becoming the network which connects all blockchains around the world both inside and outside of cryptocurrency.
More recently, ICON has begun turning its attention to tokenizing physical assets such as real estate on its blockchain. While this development is not necessarily new or groundbreaking in the cryptocurrency space, ICON has one very important thing which most other cryptocurrency projects do not.
It has support from dozens of established institutions in both the public and private sector, including the South Korean government itself. ICON also has one of the highest confirmed transactions per second (TPS) of any cryptocurrency blockchain: over 9000.
What is ICON?
ICON is a decentralized autonomous organization (DAO) which seeks to connect every single blockchain in the world, regardless of its design or consensus mechanism (e.g. proof of stake, proof of work, etc.).
A visualization of the ICON Network. Image via Medium
ICON’s native blockchain is known as the loopchain and can be conceived of as a digital keyring that allows you to attach multiple blockchains to a single hub called the Nexus that makes it possible for them to communicate with each other. Participating blockchains will eventually be able to mint both fungible and non-fungible tokens backed by ICON’s ICX token and/or real-world assets.
ICON was created by South Korean DAYLI Financial Group, which was “built” by Korean-American Min Kim. Kim is also one of the co-founders of the Swiss-based ICON foundation which “oversees the ICON project’s core activities which includes the promotion and development of the ICON protocol”.
The company that was incubated by DAYLI Financial Group to actually create the ICON network is ICONLOOP, a South Korean software company that focuses on the adoption of ICON’s loopchain and creates custom solutions for public and private enterprises including the South Korean government.
ICONLOOP, the company which develops the ICON Network. Image via IconLoop
Although any developer can create decentralized applications on the ICON loopchain, the ICON network is not yet open source. Nearly all the blockchain development and maintenance is done by ICONLOOP with oversight from the ICON Foundation. The ICON Foundation envisions a world consisting of digital nations defined by blockchains where token holders are citizens.
As such, the development of blockchain based ID technologies such as MyID and Decentralized ID (DID) is one of the central pillars of ICON. ICON also offers ICONick, a nickname that can be used in lieu of a wallet address to facilitate the transfer of funds between users on the network.
How does ICON work?
As you might have guessed, ICON is an extremely complicated protocol. Each component within it would require an entire article to properly explain. For sake of readability (and sanity) we will cover the following elements which form the core of the ICON Network: ICON’s consensus mechanism, ICON’s Incentive Scoring System (IISS), ICON’s governance structure, ICON’s Dapp ecosystem, and ICON’s Blockchain Transmission Protocol (BTP), their recently released technology which officially makes blockchain interoperability possible.
ICON uses a consensus mechanism called Loop Fault Tolerance (LFT). It is a modified version of the Byzantine Fault Tolerance (BFT) consensus. For those unfamiliar, BFT involves a series of nodes that verify transactions on the blockchain and generate new blocks.
A technical visualization of ICON’s LFT consensus mechanism: . Image via White Paper
While there are many different ways BFT systems can be designed, its primary functions are to protect against the actions of any malicious nodes on the network and also allow it to continue operating in the event that some nodes are unable to communicate. As of September 2019, ICON uses Delegated Proof of Stake (DPoS) to elect block generating nodes.
There is substantial overlap between ICON’s underlying consensus and its governance structure. It is not entirely clear which players within the governance structure are currently involved in generating and validating blocks especially with ICON’s ongoing developments.
From what we were able to gather, Public Representatives (P-Reps) run the nodes which generate blocks, Citizen Nodes (C-Nodes) create transactions and Citizen Representatives (C-Reps) are the transaction validators (more on these categories later). A block is generated roughly every 2 seconds and transaction fees on the ICON network cost a fraction of a cent (roughly 0.01 ICX).
ICON Incentive Scoring System (IISS)
The IISS is ICON’s method of incentivizing users to contribute to the ICON network. Users on the ICON network are referred to as ICONists. There are two ways ICONists can participate: directly or indirectly.
Direct contributions to the ICON network include creating a decentralized application (Dapp), running a block generating node, or kickstarting an Ecosystem Expansion Project (EEP). Indirect contributions include staking and delegating ICX to ICONists which contribute to the ICON network directly (more on this later).
A technical explanation of incentive reward distribution on the ICON Network .Image via Technical Document
The document which is intended to provide a simple overview of exactly how the IISS works is nearly 40 pages long. The main takeaway is this: the rewards for each generated block are not simply given to the nodes which generate them nor the parties which validate the transactions.
Instead, they are issued to ICONists on the network in exchange for the I-Score they accrued from contributing to the network directly or indirectly. You can think of I-Score as reputation measured numerically which can be traded into the ICON treasury for ICX tokens at any time at a rate of 1000 I-Score to 1 ICX.
ICON’s Dapp Ecosystem
While ICONists cannot propose changes to the underlying ICON blockchain, they can propose the development of Dapps on the network using something called the Dapp Booster Program. An ICONist must stake a minimum of 500 ICX to submit a proposal and must develop the Dapp themselves.
All ICONists on the network can use their staked ICX to vote on the project. At least 10% of all staked ICX must participate in the vote or else the project is rejected and the ICX staked by the ICONist who proposed the Dapp is burned.
A technical explanation of incentive reward distribution on the ICON Network .Image via White Paper
Assuming more than 10% of staked ICX participated in voting, 66% must vote in favor of the Dapp or else the project is again rejected but this time without burning the initial 500+ ICX stake. If the Dapp is approved for development, the ICX staked by the proposer is frozen in a smart contract.
The proposer then has 90 days to deliver the product for auditing and implementation by ICONLOOP. ICON hopes to eventually offer a sort of “Dapp store” which any connected blockchain can incorporate and submit Dapps to. At the time of writing, there are around a dozen apps on the ICON network related to advertising, gambling, travel, and even karaoke.
ICON Governance Structure
ICON’s governance structure is quite complex. This is because it needs to manage not only the ICON network itself, but every additional blockchain that connects to the Nexus.
An easy way to wrap your head around this is to conceive of ICON’s governance protocol as not simply a voting mechanism, but a sort of digital institution with various communities that elect representatives, where each community corresponds to a different blockchain attached to the ICON Nexus. The ability to vote for various representatives was introduced in August/September of last year, turning ICON into a DAO.
A visualization of ICON’s governance structure. Image via White Paper
Citizen nodes (C-Nodes) are users on any given blockchain attached to the ICON Nexus. They elect Community Representatives (C-Reps) which represent the interests of the blockchain they are a part of. Public Representatives (P-Reps) can be thought of as the ICON Network’s parliament.
It consists of 22 main P-Reps and 88 sub P-Reps that are voted on by users within the ICON Network and its various communities. 1 ICX counts for one vote and P-Reps are voted in roughly every 24 hours. The 22 main P-Reps can vote on 7 different governance variables including transaction fees and block rewards.
ICON Blockchain Transmission Protocol (BTP)
To quote ICON, “The BTP (Blockchain Transmission Protocol) is a standard that renders heterogeneous blockchains interoperable, including blockchains that entail completely different consensus models and algorithms.”
A visualization of ICON’s blockchain interoperability protocol, where the Relay is the connection point to the ICON loopchain. Image via Medium
In contrast to ICON’s other infrastructure, BTP is surprisingly easy to understand and fundamentally consists of 3 “plug-ins” which other blockchains must incorporate into their code to communicate and participate in the ICON Network. These are the BTP Message Center, the BTP Message Verifier, and the BTP Service Handler. You can read more about this here.
What is ICX cryptocurrency?
While ICON’s ICX cryptocurrency was originally released as an ERC-20 token on the Ethereum blockchain in 2017, all tokens were migrated in 2018 when the ICON main net launched. Note that if you transfer your ICX to an ERC-20 address you will lose it (many resources about ICON still note it as an ERC-20 token!).
ICX is the cryptocurrency used on the ICON loopchain for all economic activities. These include staking, paying fees for smart contracts and transactions, rewarding users for participating in the ICON Network, and will eventually be used to back any tokens issued on the ICON Network.
The ICON ICX ICO
ICON’s initial coin offering (ICO) took place in September 2017. Slightly more than 400 million ERC-20 ICX were sold at a price of roughly 11 cents USD per token. It is important to note that this was only 50% of the initially minted 800 million ICX.
The ICX token’s distribution and ICON’s use of ICO funds. Image via ICO Drops
Of the remaining 400 million ICX, 16% was given to the team, early contributors, and advisors, 20% was given to the project’s community and its partners, and 14% was given to the ICON Foundation. The ICX cryptocurrency does not have a supply cap.
ICX Cryptocurrency Staking
ICON introduced staking to the network in late August 2019 when it began the pre-selection process for P-Reps. By the end of September 2019, 22 main P-Reps had been successfully elected, cementing the integration of staking on ICON. Staking is done through ICON’s ICONex wallet and is also available with the Ledger Nano X.
ICX staking details and calculator. Image via ICX Stakr
The staking rewards for ICX vary between 6% and 36% per year depending on the total amount of ICX being staked, where a greater amount of staked ICX corresponds to smaller annual returns. In May of this year, the ICON Foundation announced LICX, a new protocol which will eventually allow ICONists to transfer staked ICX tokens within the network and still receive staking rewards.
Staking rewards on the ICON Network are not paid directly in ICX, but instead paid in I-Score, which can be instantly converted into ICX from the treasury. When you stake ICX, your funds are locked for a period referred to as the “Un-staking Period” which can last anywhere from 5 to 20 days.
The ICX un-staking period graph. Image via IISS Paper
This period can be extended indefinitely and likewise depends on the amount of ICX being staked on the network (the less ICX is staked, the longer you must lock your funds). Staking on the ICX network essentially involves voting for a P-Rep and simultaneously delegating your ICX them so they can vote on changes to governance variables. ICON documentation calls this Delegated Proof of Contribution (DPC).
One interesting thing to note about ICX staking is that it is seen by some seasoned stakers as a reliable place to HODL crypto. This is because the price of ICX has remained both stable and low for the past few months (or even years, depending on your definition of stable).
Since staking rewards are paid out in ICX, this means you can be sure that you will have a consistent return in USD value and at the same time be well positioned for any upcoming bull runs. The current annual return for staking ICX is around 13%.
ICX Price Analysis
ICX has a fairly predictable price history. It entered the crypto markets in late 2017 at a price of roughly 40 cents USD per coin (4x its ICO price) and saw a spectacular rise to nearly 13$USD in early 2018.
The price history of ICX cryptocurrency. Image via CoinMarketCap
In the months that followed it dropped to half of its initial market price and effectively flatlined at around 10 cents USD by the end of 2019. However, the price rose to nearly 50 cents USD in February of 2020 and has bounced between 20-40 cents USD ever since.
ICX Exchange Listings
ICX has seen a massive expansion in market pairings since we last covered ICON. ICX is now available on a slew of reputable exchanges including Binance, OKEx, Kraken and Huobi. Liquidity appears to be quite evenly spread between the top 10 pairings and exchanges.
The daily trading volume is also quite good considering that ICX is a stakeable cryptocurrency. As of May of this year, you can also buy ICX directly with fiat using a debit card or credit card via Simplex.
ICX cryptocurrency wallets
Unfortunately, if you are looking to safely store your ICX cryptocurrency your options are limited. The only third-party wallets that support ICX are Trust Wallet (mobile) and the Ledger Nano X hardware wallet.
ICON’s ICX wallet, ICONex. Image via Icon Foundation
What is nice is that you can use the latter for ICX staking. ICON offers their own native wallet called the ICONex. It is available both as a Google Chrome extension and as a mobile app for Android and iOS devices. Both support ICX staking. Fun fact: you can also store Ethereum on ICONex.
The ICON Roadmap
Despite the dismal price action of ICX, the ICON development team has been hard at work behind the scenes. The ICON Foundation has done a very good job of keeping the ICON community informed about roadmap changes and achievements via Medium.
The 2020 roadmap for the ICON Network. Image via Icon Blog
In February of this year they detailed a roadmap for all of 2020 and have been providing monthly updates ever since. The February post highlighted four key “themes”: network enhancement, open source enhancement, governance system updates, and the implementation of the BTP as well as a sidechain.
ICON Open Source Development
In March, ICON took a baby step towards becoming open source by allowing another South Korean blockchain/fintech firm called VELIC to take over the development of ICONex and ICON Tracker. Recall that he former is ICON’s native cryptocurrency wallet.
VELIC becomes a developer on the ICON Network. Image via Icon Blog
The latter is ICON’s blockchain explorer. Oddly enough, the ICON Foundation noted that this change was implemented primarily to allow ICONLOOP to focus more on the development and adoption of its other technologies such as MyID and DID.
ICON Network development
To enhance the ICON network, in April the development team revealed a new consensus mechanism known as LFT2. Currently in development, it can be simply understood as a more efficient version of ICON’s current consensus.
A technical visualization of ICON’s LFT2 consensus mechanism. Image via Icon Blog
Once implemented, it will do three things: increase the TPS of the ICON network, improve the efficiency of smart contracts built on the network, and increase the security of the network. It is worth noting that LFT2 has been audited by KAIST, a leading research university in South Korea.
ICON Governance development
To improve governance, ICON surfaced a series of amendments to its ecosystem in April and May. The two most notable were the introduction of the P-Rep delegation program and a change to the block reward distribution mechanism.
Changes to ICON’s block rewards. Image via Icon Blog
The main highlight of the P-Rep delegation program is that the ICON Foundation will delegate a portion of ICX treasury funds to parties on the network which are actively contributing to community building, network development, and/or marketing.
Block rewards were also changed so that the reward earned from each block generated would be split 17.5% to 82.5% Validator / Voter instead of the previous 36% to 65%. This was changed to incentivize voter participation.
ICON BTP & sidechain Development
The BTP was revealed in late May and you may recall that its inner workings were described earlier in this article. A sidechain has yet to be implemented, but a few details about it have been released over the last few months. It will function as a virtual machine called the Java Virtual Machine (JVM) that will incentivize developers to build smart contracts.
The purpose of the side chain is to enhance scalability and allow the ICON loopchain to focus on blockchain interoperability and transaction processing. Although the sidechain will be fundamentally dependent on the root chain, the sidechain will have its own unique governance model and incentive structure.
ICON’s Future Developments
ICON’s long-term roadmap can be found on the ICON Foundation website and is divided into 3 sections: Blockchain, Governance, and Services. Each has an icon next to it which indicates whether it has been completed, if it is currently being optimized, whether it is currently in research, or currently in development.
Icon Roadmap. Image via Icon Foundation
While there are way too many milestones to list here, perhaps the most interesting is a recent update about its non-fungible token (NFT) standard called IRC-3 which was first proposed in 2018. Equivalent to Ethereum’s ERC-721 tokens, IRC-3 tokens will allow users to create collectibles and eventually tokenize real world assets on the ICON blockchain.
Our take on ICON and ICX
ICON is easily one of the largest projects in the cryptocurrency space. While the various teams and individuals behind the ICON network are seriously legitimate, the nearly unfathomable scope of the project makes it genuinely hard to explain or even keep up with.
ICON at a glance. Image via Icon Foundation
It seems that ICONLOOP has really put their nose to the grindstone in recent months which is absolutely fantastic but they are moving so fast that it seems unlikely that more than a handful of people who are closely involved with the project could really give you a comprehensive explanation of what exactly is going on. We only just scratched the surface!
ICON’s lack of clarity
In our previous article about ICON in 2018, we expressed our frustration about the lack of clarity and poor communication from the project, namely in the word salad that was its initial whitepaper.
Since that time, the ICON Foundation seems to have put some serious effort into providing clarification about the ICON network. The best evidence of this is in the various Yellow papers they have published about the core features of their blockchain, specifically its consensus, governance, and incentive structures.
Min and Ricky from ICON Foundation being grilled by Blockchain Brad. Image via YouTube
Still, a great deal of existing documentation is still slightly too technical for the average person, and the conflicting terminology used in important documentation in the past and present makes it genuinely difficult to understand how the ICON network functions at its core.
This does not seem to be on purpose but merely a consequence of a project which is nothing short of a skyscraper of computer code. For what it is worth, Min Kim’s frequent appearances and interviews have helped understand what is going on behind the scenes in recent months.
Issues with ICON’s Consensus & Governance
There are a whole host of issues in ICON’s consensus mechanism and governance structure. The most obvious is this: in a system where 1 vote = 1 ICX, those who hold the most ICX will have the largest sway in the network. Period.
It does not matter what fancy acronym you place before the word “consensus”, this still holds true and creates a pay-to-play system which is effectively rigged from the start, as a substantial amount of tokens are being held by the players in the ICON Network, including ICONLOOP and the ICON Foundation.
The top 5 P-Reps in ICON’s governance system. Image via Icon Tracker
ICON is also far from becoming a truly decentralized autonomous organization. To be far, Min Kim has admitted this and specified that it will be a relatively slow handover to the ICON community.
Until then, the ICON Foundation appears to have the final say via ICONLOOP, which appears to be implementing various developments independently, since other ICONists can only submit proposals for Dapps which are again vetted by ICONLOOP.
Even if the ICON community did have a say on more underlying elements within the blockchain, the ICON Foundation and other associated parties would still have a significant influence on voting outcomes.
Blockchain Does not Equal Cryptocurrency
Whether intentional or not, there seems to be a conflation between blockchain and cryptocurrency in everyday discussions about crypto. The fact of the matter is that a country like China developing its own in-house blockchain will do nothing to bolster cryptocurrency adoption. In fact, China’s experimentation with blockchain could be seen as more of a negative development than a positive one.
China’s use of blockchain could lead to increased totalitarian practices by its government. Image via Shutterstock
ICON seems to walk this fine line as it is working closely with legacy institutions and the South Korean government. Now recall that ICONLOOP is developing blockchain IDs. Implementing this sort of technology could very quickly go from something good to something unfathomably bad.
Furthermore, it should be noted that the BTP interoperability protocol is neither trustless nor private. Contrast this to a project like Ren’s RenVM which does allow for trustless interoperability between blockchains.
Although this interoperability is limited to a handful of cryptocurrency blockchains for the time being, the number of supported blockchains will increase as time goes on and could theoretically support others outside of the cryptocurrency space at some point. Finally, it is questionable whether legacy instructions would willingly implement the BTP components required for interoperability with the ICON Network.
Concerns aside, ICON seems to have the wind generously blowing in the direction of its sails. Development has been relentless this year and is showing no signs of slowing down. Most importantly, ICON has been putting in the extra work to make connections with entities outside of South Korea and Asia.
Even something as simple as listings on more exchanges goes a long way in putting the project on the international stage. While there is still a long way to go, ICON has proven that it has the stamina and grit to meet its objectives.
Whether it can outperform other similar projects like Ethereum and any other new competitors which may appear in the coming years is something that only time will tell.
Featured Image via Shutterstock