ICP token

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Internet Computer Protocol (ICP) utility tokens play a multipronged role within the IC. ICP token holders can participate in the governance of the Internet Computer, ICP tokens are used to remunerate node providers, and (indirectly) are used to pay for the resources used by the smart contracts running on the IC. ICP tokens are traded on the open market [1][2] on many crypto exchanges.

ICP tokens and Governance

To participate in the governance of the Internet Computer one must lock ICP tokens in a stake. On the IC the stakes are called neurons, and allow participation in the algorithmic governance system implemented on the IC by the Network Nervous System (NNS). Neuron owners can submit proposals and vote on proposals that guide the evolution of the IC. At regular intervals, (currently, every 24h), the neurons that have voted the proposals settled in the previous period earn rewards proportional to the voting power of the neuron. This wiki also provides further information on how to stake ICP tokens and how neurons participate in governance.

ICP tokens and Canisters (dapps/smart contracts)

ICP tokens can be converted to cycles. Cycles are the second native utility token of the IC and their primary purpose is to power the smart contract ecosystem built on the IC platform. In particular, cycles are used to pay for creating canisters and for the resources that canisters use (storage, computation, and bandwidth).

Conversion of ICP to cycles is a built-in functionality of the NNS: the NNS burns ICP tokens and mints cycles. The conversion process pegs the cost of cycles to the value of a basket of currencies called Special drawing rights (SDR). In a bit more detail, the IC ingests information regarding the latest ICP to SDR conversion rate and then sets the ICP to cycles conversion rate so that 1 trillion cycles costs 0.8 SDR. In the conversion process, the ICP tokens are effectively burnt and the corresponding cycles are minted.

ICP tokens and node providers

ICP tokens are used to pay node providers -- these are the entities that own the computing nodes that make up the IC. At regular intervals (currently monthly), the NNS decides on the number of tokens which each node provider has earned, mints the corresponding tokens, and sends the tokens to the node provider's account.

How to get ICP tokens

There are different ways you can acquire ICP tokens:

  • Purchase ICP tokens directly through an exchange that lists ICP tokens available for trade. Coinmarketcap maintains a reasonably complete list of exchanges that trade ICP tokens
  • Receive tokens as voting rewards for participating in the governance of the Internet Computer
  • Receive ICP tokens from somebody who sends them to an account you created
  • Receive a developer grant of tokens through the Internet Computer Association (ICA) or the DFINITY Foundation
  • Receive tokens as remuneration for providing computing capacity as a node provider

Ledger of ICP accounts and transactions

On the IC, the information about the ICP tokens is maintained in the Ledger canister, a component of the Network Nervous System. The Ledger canister maintains a mapping between account identifiers and (ICP) token amounts. The Ledger provides an API that allows the principal, e.g. a user or a canister, who controls an account to transfer ICP tokens to any other account. All transfers are recorded as transactions in a ledger of transactions. The ledger also records minting and burning of ICP tokens.

Control over a user’s ICP accounts and neurons is associated with a unique principal. The principal identifies the authorization mechanism that can be used for operations that involve the principal's accounts and neurons. User principals are derived from hashes of public signature keys and to authorize a transaction the user creates a digital signature on it. Needless to say, the user's private signing key should be securely generated (e.g., have sufficient entropy), should be securely stored and should be backed up. Depending on the value of the ICP tokens (or neurons) the key controls, the user can make a trade-off point between security of the key and the level of friction required to utilize the key. Guidance to users for managing ICP holdings can be found here.