The onset of the COVID-19 pandemic and the increase in household savings has driven the biggest boom in the crypto market’s relatively short history, with the overall market cap going from $500 billion in 2020 to a whopping $3 trillion in 2021.
Among the crypto coins that have attracted the most attention this past year is the Internet Computer coin or token, commonly known as ICP. Although it’s not as popular as the likes of Bitcoin and Ethereum, it runs on a futuristic network and will undoubtedly be a big deal in the near future
What is ICP Coin?
The ICP coin is basically the reward token given to computers that participate in the ICP network. The network is itself a type of blockchain that is designed to run on a serverless, decentralized, and thereby “limitless” model, and was developed by a Swiss non-profit company called DFINITY. Their main objective was to decentralize the internet, and in particular, make redundant the roles of tech monopolies like Google and Facebook.
Fundamentally, ICP is connected to millions of computers that work together, making it incredibly easy and fast to generate smart contracts and tokens and finalize transactions.
Participants of the network’s development programs are awarded tokens based on their contributions and good conduct. These tokens typically serve as votes, giving owners a say in the future development of the ICP network. However, they can also be used to pay transaction charges (for using the network) or even be traded on crypto exchanges like other digital currencies.
How Does it Work?
Before going much further, it is important to reiterate the fact that ICP is more than a digital currency. In fact, the coin is just a utility token that gives its carriers the ability to use the network and contribute to decision-making processes.
With that out of the way, let’s now see how the ICP ecosystem works…
Basically, the Internet Computer network runs on the Internet Computer Protocol (also known as ICP), which incorporates 48 data centers (mostly in Europe, Asia, and North America) and thousands of nodes. Moreover, the underlying software is communally hosted on all the independent nodes rather than a single place.
History of ICP Coin
DFINITY launched the ICP coin as the native currency of the network in May 2021, alongside the Genesis version, which is the latest version of the blockchain. Over 470 million coins were released in the initial offer and the currency quickly shot up the ranks, becoming the third most traded crypto coin in major exchanges after Bitcoin and Ethereum.
On 10th May 2021, just a few days after its launch, the coin was priced at $737. It however plummeted to $250 in less than a week before eventually settling at the $30-$40 range. At the time of writing, the coin was worth $37.
Uses of ICP Coin
Although you can use the ICP token as a digital or trading asset, it was originally meant to serve 3 main purposes:
Paying Gas Fee: The ICP, like all blockchains, is run by a dedicated, albeit decentralized network of developers who need to be compensated for their time and expertise. These payments are known as gas or canister fees and are paid by users in form of tokens.
System Governance: ICP Coins also work as votes, and holders can vote for or against any proposed changes to the blockchain. Of course, the more tokens you have, the bigger your say.
Rewards: As mentioned earlier, anyone who contributes to the ICP system in any material way gets awarded a token amount commensurate to their contribution. Data centers and nodes are also awarded for keeping things running.
How Can You Get ICP?
There are two ways you can acquire ICP coins:
1) Joining the Network
You can get free tokens when you join the ICP network and participate in select events. For instance, DFINITY awarded all users who had subscribed to their September 2020 newsletter. You can earn rewards by participating in development and survey programs, which are fortunately almost always in progress.
Admittedly, the wait for free tokens can be a long and frustrating one. Therefore, I wouldn’t recommend going this route, unless you are not interested in making money.
2. Buying From an Exchange
Although it never had a formal ICO like other cryptocurrencies, the ICP coin is available on the two major crypto exchanges, Coinbase and Binance. Both of them have conversion features where you can convert fiat currency, or other cryptos into ICP tokens. The process involves several important steps as explained in the next section.
How to Buy ICP Coin From an Exchange
Whatever exchange you choose to buy your tokens from, the steps to follow are pretty much the same. Simply:
1. Open an Exchange Account
Decide on what exchange you want to trade on and open an account with them. The good thing is, you don’t have to get your choice of exchange right the first time as you can transfer the coins you own to other exchanges or to an offline wallet.
Notably, credible exchanges like Binance will require identity verification if your transactions are above a certain level. This is part of their KYC compliance measures and the documents you are likely to be asked for are your social security number, pictures of your driving license, and proof of address.
2. Do Some Research
If you are new to the crypto market, you may need to do a bit of research before jumping into the ICP bandwagon. Among the things you need to research on include the coin’s price movements over the past several months and their causes, any new releases or announcements coming soon, and lastly, what people are saying about the coin. With that information in mind, it will be easier for you to find the right entry price and subsequently avoid buying at an exaggerated price.
3. Buy the Coins
When you think the prices are at the right level for you, make your purchase. You can do this instantly, or by setting a limit buy order. If you choose the former, your purchase will be subject to the current market price while in the latter case, the trade executes when the price goes below the price you set.
4. Move Them to a Wallet
Crypto wallets are typically safe storage places for digital assets and have advanced security features (particularly the private keys) that allow you to fully secure your coins even in the event that your exchange account is hacked. This is in contrast with exchanges, which retain some control over their users’ private keys, exposing them to a potential loss of funds in case of a security breach.
So, if you are trading large volumes, I would recommend transferring them into a wallet as soon as you buy them. And although online wallets are cheaper and convenient, physical wallets are much safer, more so if you plan to hold your coins for longer periods.
Best Strategy for Buying ICP Coin as a Newbie
If you are new to trading cryptos, you will want to avoid complicating things on your first trade. So, leave alone all the candlesticks and YouTube tutorials. Instead, use the easy, time-proven dollar-cost averaging technique.
This basically involves buying your coins in increments, instead of making one single, risky move. For instance, if you plan on spending $100, you can divide your purchase into 10 phases, buying $10 worth of coins in each phase. The amount of time before each purchase should depend on the movements in the market and should fit into the overall idea of the strategy, which is to reduce the risks of price fluctuations on your investments.
Are There Any Risks Associated With ICP?
From the outside looking in, ICP is a sensible investment. I mean, it’s “decentralized, fast, and logical” – all the features of the next generation of crypto.
However, if you read the fine print, you will begin noting some fundamental gaps in the network. For one, it still remains relatively centralized, with major decisions still in the hands of the DFINITY Foundation. This is not only in contrast to its promoted image as a “fully decentralized network”, but also goes against the fundamental concept of blockchain technology as typified by Bitcoin and Ethereum.
Secondly, as much as you can trade ICP coins in exchanges, they have no innate value outside of the ICP network and its associated Dapps. You can’t buy stuff with them or pay for services like you can with Bitcoin and Ethereum, and have to use an exchange (and pay all the fees associated with that) every time you need to convert them to cash.
Last but not least, the fact that it’s a new currency makes the ICP coin highly volatile and thus very risky for short-term strategies. The high volatility gives you a chance to make some decent profits if you employ the right scalping techniques.
Overall, my views on the ICP coin are neutral – the idea behind it makes a lot of sense, but its price action since it went live is somewhat unnerving. Basically, if you’re looking to make some long-term investments, ICP is probably not for you as it’s simply too volatile. If, however, you like the idea behind it, or are looking for some short-time fun, the coin looks good enough.