A Network-of-Networks with the Potential to transform the Blockchain Industry
Fundamentals check:
Website: https://www.icon.foundation/
Whitepaper: https://www.icon.foundation/resources/whitepaper/ICON-Whitepaper-EN-Draft.pdf
Working Product: Mainnet launched on January 24th. Many enterprise blockchains built by theloop ready to be connected through ICON.
Roadmap: On their recent summit, ICON presented a roadmap for 2018, targeting a token swap and the release of a mobile wallet in March, the ICON Incentives Scoring System and an ICO-platform in April, the launch of their decentralized exchange and the Nexus Public Channel in Q2 in Q3 the Governance Channel and privacy functions based on the Zero Knowledge Protocol and finally, Q4 is reserved for improvements on their smartcontract system SCORE.¹
Technicals:
- Market Cap: ~$1.417.137.000
- Circulating Supply: 400,230,000 ICX (slightly different from coinmarketcap)
- Total Supply: 800,460,000 ICX (double than what is stated on coinmarketcap)
- Funds raised through ICO: $48.750.000
- ICO ended: 09/20/2017
- ICO Price: 1 ICX = $0.11 (0.00040 ETH)
- Today’s price: $3.67
- ERC20?: Yes (token swap coming in March)
- Exchanges: Most volume on Binance, OKEx, Huobi and Gate.io. ICX is not listed on a Korean exchange yet.
Pitch
“The ICON Project aims to build a decentralized network that allows independent blockchains with different governances to transact with one another without intermediaries. Anyone can create a new blockchain project and join the network. A new blockchain project is free to connect with existing projects and create new unique worlds, or blockchain multiverse. ICON itself can be viewed as both a living organism and an ecosystem. […] A future with faster money remittance and frictionless value exchange of securities, medical records, academic data, insurance fees is within our reach.”²
The Vision
Much has already been written and said about ICON since their initial coin offering back in September of 2017. The tokens dropped into a historic bull market for alts in December and investors already made incredible returns. ICX hit an all-time-high of around $12.50 on the 9th of January but since then, it has been correcting heavily with the overall market, the downtrend further amplified by recent news and events that did not live up to people’s expectations. The ICON mainnet however, has successfully been launched on January 24th with the generation of its genesis block. In this paper, I would like to zoom out a bit and explain what can be expected from ICON in the long-run.
Let me start out with this: ICON is as much an idealist utopia as it is an ambitious technological endeavor. Inspired by the works of philosophers Gilles Deleuze an Felix Guattari, it ranks among the projects with the strongest vision I have come across in the blockchain and crypto space. Deleuze famously imagined the future of society, culture, science and research as a “rhizome”, an underground root network formed by and interconnecting plants. A rhizome is horizontal and non-hierarchical in nature and exhibits continual adaptation and exchange as key features.³ That is the image behind ICON’s slogan “Hyperconnect the world”.
Listening to co-founder Min Kim talk about ICON only underlines how much the foundation is driven by this vision.⁴ Kim does not care much about short term news or price action. He is in this to build the most stable and adaptable basis for a network of networks that is supposed to span communities and enterprise not just in South Korea but all across the globe. At the same time he is very open to cooperating with other blockchain projects of which ICON has assembled a dream team for current and future partnerships. In the 1980s, Michel Foucault, one of the intellectual fathers of post-structuralism, jokingly wrote that “Perhaps one day this century will be known as deleuzian.” I will argue here that their “ICON Republic” (the hub that connects all networks) might evolve into the framework for a deleuzian 21st century.
Value Proposition and how it all works
If ICON’s platform finds adoption, it will be absolutely massive in scale. Starting with South Korea, they will be putting whole nations on their blockchain. Most seasoned investors who are reading this already know what they are dealing with but I will give a quick recap:
Their loopchain blockchain technology, developed by ICON’s founding company theloop, is already operating in several sectors in Korea with custom applications for banks, hospitals and universities. These communities, individual blockchains with their own governance systems, set of rules and sometimes even currencies, will be connected by what the team calls the ICON Nexus.
Other projects would call this a parent chain that will be the point of intersection for a plethora of different blockchains and dApps. However, this goes beyond the ones that theloop has built for clients. Theoretically all blockchains such as the Ethereum or the Bitcoin blockchain should be connectable on the Nexus. With this structure, ICON are integrating a product that competitors like for example Origin Protocol are developing for supply chains directly into the core of their system.
Interoperability and connectivity are the major improvements that will be brought to the table. This might not sound like a big deal at first but it tackles a major problem of this very young industry. As Deloitte put it:
“[…] the need for standardized technologies, platforms, and skillsets becomes more pressing each day. Consider standardization’s potential benefits — none of which companies developing blockchain capabilities currently enjoy:
- Enterprises would be able to share blockchain solutions more easily, and collaborate on their ongoing development.
- Standardized technologies can evolve over time. The inefficiency of rip-and-replace with every iteration could become a thing of the past.
- Enterprises would be able to use accepted standards to validate their PoCs. Likewise, they could extend those standards across the organization as production blockchains scale.
- IT talent could develop deep knowledge in one or two prominent blockchain protocols rather than developing basic knowhow in multiple protocols or platforms.
Unfortunately, there are currently no overarching technical standards for blockchain, and it is unrealistic to think we will get them soon, if ever, across all use cases. For CIOs [Chief Information Officers], this presents a pressing question: Do you want to wait for standards to be defined by your competitors, or should you and your team work to define the standards yourselves?”⁵
It’s pretty clear how ICON’s own CIOs answered this question and for this project it’s not an afterthought but its very reason to exist. Some people rightfully pointed out that the communities will more often than not introduce or continue to use their own tokens as a means of exchange but ICX will be the fuel running the Nexus linking up all these blockchains. If ICON finds adoption, the scale of transactions we are talking about here is difficult to predict but will it will surely reach numbers unprecedented.
To deal with a flow of information of this magnitude, ICON introduces some significant advancements. The key thing to point out here is that these technologies and features are either already working or will be implemented over the coming months:
- DaVinCI: Theloop has created the leading AI platform in Korea way before ICON was conceived. Already today, DaVinCI is used widely in the Korean banking sector to create prediction models for risk assessment. ICON is actually integrating their AI to automate similar modes of risk assessment and price calculation on the Nexus: “Transactions and other activity produced on the ICON Network will be continuously analyzed to align the Network’s growth with individual compensation. Most other blockchain networks have been inflexible, failing to respond to market movements. The ICON Network advantage is in being able to maintain a sustainable basis for growth by responding quickly to market change.”⁶ The team has machine learning scientists in-house so there is constant development going on at this front. This feature alone is something other projects build their whole business on and DaVinCI is already working and has proven itself on tasks like insurance loss ratio and credit risk prediction or conversion rate and price sensitivity calculation with partners like AXA Direct, Samsung Card or Hyundai Capital.
- Loop Fault Tolerance (LFT): Loopchain uses an enhanced Byzantine Fault Tolerance-based algorithm that is designed to reach quicker consensus while maintaining the finality. LFT will still be highly customizable for different communities in regard of voting metrics but it’s main features are accelerated transaction speeds and the elimination of any possibility for forks. This model is a variant of delegated proof of stake algorithms similar to what we have seen with ARK or Boscoin (a less known platform from Korea) and it will feature a variety of nodes that connect communities and dApps to the Nexus. At this point in time we can only speculate if and how there will be a staking element to holding ICX tokens. According to the white paper, this could come into play with light clients and full nodes on the public channel that will execute ICX transactions between dApps. From what information I gathered, I expect rewards for nodes (that will again be calculated by DAVinCI on the basses of the network’s Incentives Scoring System (IISS).
- SCORE: SCORE will enable smart contracts to be executed in real time and independently from the underlying blockchain, placing them directly in the node operation environment and avoiding separate virtual machines.
- Decentralized Governance and Community Delegates: In his interview with BlockchainBrad, Min Kim points out that neither the ICON Foundation nor the Nexus are owned by theloop. We can think of the ICON Republic as a public good that is managed by delegates elected by the communities and other independent blockchains connected to the Nexus: Each community member (for example a hospital) will control a C-Node that has the right to vote for a delegate of the medical community. This community will then be represented by a C-Rep that can be made up of one or more nodes depending on the community’s consensus mechanism. ICON recently revealed that they are setting up 40 C-Rep nodes in 10 different regional areas already. The governance system consists of even more layers in the network such as a Notary Channel made of a collection of light nodes but I will not go into more detail here.
What I want to point out though is that ICON is not the first public blockchain project that emphasizes community governance in their overall design (Vechain would be a very prominent example) and it is a feature not be overlooked when it comes to the sustainability and adaptiveness of an endeavor of this scale. From what we can find out in the whitepaper, ICON’s governance system will be even more decentralized than what Vechain has in mind for their Vechain Thor network. You could argue though, that their AI will be at the center of all calculations and having control over the parameters set for the AI would offer centralized control. One of the key powers of the delegates that we will have to monitor in the future in any case would be the issuance of up to 20% more ICX tokens annually. Delegates elected by the communities will effectively be able to introduce inflation and in effect up the total supply of ICX.
- ICOs and dApps: Apart from connecting existing other blockchains and public or private enterprise blockchains created by theloop, ICON will hold initial coin offerings and support the development of dApps on loopchain. The ICO-platform is scheduled to launch as soon as April and will feature the following ICOs: Stove by Smilegate (Smilegate is a major game studio that is valuated at $5.9 Billion according to Forbes), Bluewhale (a blockchain hub for the freelancer economy), TINK (an aggregator for social media rating), Silkroad (a supply chain anti-fraud project similar to Waltonchain or VeChain that focusses on waste disposal in the semiconductor industry), Sentinel by UPPSALA (a decentralized security intelligence platform on the blockchain that helps identifying and persecuting hackers and malevolent actors on the blockchain) and AD4th (a decentralized advertising platform that is partnered with major players in the industry in Korea).
- DEX: ICON’s ETH/ICX own decentralized exchange on the Bancor protocoll will launch in Q2 of 2018.
Background and Team
Even at its inception, The ICON Foundation was a collaborative effort of the private sector and academia: The non-profit was started by theloop, a software consulting firm that is a joint venture between three Korean universities and DAYLI Intelligence, the largest fintech holding company in South Korea that spans approximately 25 companies). The ties to DAYLI still hold strong as for example Min Kim is working as a chief strategy officer there. Besides Kim, noteworthy members of the Foundation Council are theloop’s CEO Jonghyup Kim, who has 18 years worth of experience as an engineer and worked at Jang Media Interactive and BT Works, and KJ Eee, who is and engineer and computer scientist that is responsible for developing Korea’s first firewall. He has founded other companies and is the current CEO of DAYLI Intelligence.
Overall, the team is one of the strongest on any current blockchain project out there, with A.I., engineering, blockchain, and marketing experts working full time at theloop. ICON’s advisors feature Don Tapscott who co-founded the Blockchain Research Institute, Jason Best who was featured by Forbes as a top 10 player in crowdfunding that co-founded Crowdfund Capital Advisors and finally Jehan Chu, a managing partner at Kenetic Capital.
Partnerships
As a function of their tie-ins with theloop and DAYLI Intelligence, ICON boasts an impressive list of real world parnerships that only few other projects in the blockchain space can rival. One of the most common catchphrases that is being thrown around about ICON is that it will be Korea’s Ethereum. In fact, there are good reasons to not compare ICON with Ethereum at all but view it as a competitor to IBM’s private blockchain solution for enterprise, Hyperledger.⁸ Theloop works as an incubator here that approaches big business partners directly to help them solutions that are tailored to their specific needs. The Nexus is the next important step that adds a connecting public blockchain layer on top of it and by that creates an immense amount of value.
Investors that look at the price of ICX today and are unsure if it would be a good buy should pay attention to the fact that a lot of the partnerships are not only already existent, The blockchains for the respective sectors in Korea (like a system for insurance claims for the Insurance Consortium, the U-Coin system for cash-free payment at university campuses or the CHAIN ID system that has been the first major update to Korea’s online banking security in almost 20 years)⁹ have already been built and operating for a considerable time.
For a list of the real-world partnerships I will refer you to another fabulous chart by Spec-Rationality that comprises everything in a clearly laid out fashion:
On the top of this chart we can see the Interoperability Alliance that ICON has announced with WanChain and AION back in October of 2017. The projects share an interest in connecting blockchains through interchain transactions and alleys of communication. The alliance is looking to become somewhat of an all-star team for the coming months or maybe years as AION is seen by some experts as one of the dark horses of this market while the hype around WanChain might even outshine ICON’s steller performance in terms of price action. Min Kim however has recently pointed out that, despite their announcements and appearances on stage together, the alliance is informal in nature and they do not have written agreements with AION and WanChain yet. They announced the alliance early to counteract speculations about possible competition. Blockchain is so much in its infancy, Kim stated, that they wanted to send a message to the community that they are building this technology and it is very much an effort on many fronts. Contracts are to be expected over the course of the coming months though.
The first contractual relationship with another existing blockchain project got revealed in January 2018: Kyber Network is going to handle any token conversion to the ICON network. “Our partnership with Kyber Network”, Jonghyup Kim told the press, “brings us one step closer to inter-chain token exchange. Down the road, we hope to connect and support additional blockchains and tokens, eventually taking the place of today’s centralized exchange regime.”¹⁰ Both companies expect the transaction volume on the Nexus to grow exponentially as more and more blockchains are connected to the network. Kyber Network is widely seen as one of the most promising projects out there at the moment so this partnership should not be underestimated.
Lastly, on their mainnet launch event ICON presented Nucleus Vision that recently canceled their ICO after selling out in private sale. So far it is not clear what the relationship between the Foundation and Nucleus will be but with their IoT-based identification system for the retail sector they are another prominent business to look out for that might soon show up as part of ICON’s ecosystem.¹¹
Possible roadblocks
- Steemit author roosterred argues that the inflation introduced annually could weaken the potential growth that investors can expect from the ICX tokens. He further points out that the communities are free to set up their own means of exchange within their private blockchains and just include their relevant business partners so ICX could get lesser use than many people expect.¹² He goes on pointing out that there will still be a significant use of the tokens when communities and users interact with dApps in the ICON Republic and I agree with that assessment. Furthermore I am very optimistic that the amount of traffic between communities will amount to insane numbers anyways if the concept comes to fruition.
- This leads us to another problem that exists for any platform in development today. Blockchains will need to figure out how to scale so that they will be actually able to process the amount of transactions that they are aiming for when mass adoption of the technology happens. I usually point this out when discussing developments on the Ethereum blockchain but with ICON I am much more positive that we will see higher and higher txs/s as development continues. So far we can see that theloops private blockchains for enterprise seem to perform well. On top of that I like that they followed a layered approach to building the Nexus that, together with a regulating AI and the SCORE smart contract environment could theoretically produce the expected results.
- Regarding the hype around ICON being the leading Korean project I came around an interesting quote from a Forbes article by See-eun Ha, the cohost of a Korean Youtube channel called “The Blockchainers”: He says that building a wide-scale blockchain network in Korea is still uncharted territory and people in Korea “think of it first for its use as an investment vehicle to help them make money, but not necessarily its costs or other applications”. Development, See-eun Ha continues, is actually behind compared to other nations because proprietary software has been dominating the market over open source solutions for a long time. ICON however, he sees as the VIP of the Korean industry “I think what gives them leverage is that they have a working blockchain engine that is to be deployed in the banking, medical and university sectors. We know they’re capable at the minimum, so that already puts them ahead of other ICOs that don’t have working products.”¹³
- Something concerning to look out for over the coming weeks in terms of price action will be the minting of the remaining tokens that did not get distributed to ICO buyers. We saw what effect the update of the circulating supply on coinmarket had on the price of VeChain although the company has been very transparent about their actual token supply and why coinmarketcap did not update it for months. ICON is similarly transparent about what will happen and assures token holders that the newly minted ICX tokens will be mostly be stored in reserve for the upcoming decentralized exchange or allocated to team members and strategic partners that will have to keep them in lockup for a certain amount of time. As far as I understand, the total supply on coinmarketcap should double but not the circulating supply so it should not effect the market cap. I already factored that in regarding the token metrics in this article. I am not 100% sure about that so comments would be very welcome.
Outlook:
The crypto market won’t stay as it is now forever. Eventually, many tokens and coins you see today on coinmarketcap will disappear. Development teams will disband, partnerships will dissolve and companies will go bankrupt. At the Dojo we are on the constant lookout for projects that have the potential to come out of this game on top and reap the rewards that a potential multi-trillion dollar market will have to offer. Taking this into account, platforms have been one of our priorities for some time now and ICON exhibits the key features we look for in a project: Real-world partnerships with with international corporations and governments alike and the fundamentals (team, leadership, tech and vision) to pull through and deliver a truly convincing product fit for mass adoption. VeChain had it and ICON has it in spades.
If you did not participate in ICON’s the initial coin offering there was no opportunity to get into ICX as cheap as we got with VeChain back in October. Prices on the first day of ICX’s binance listing were a good buying opportunity but it did not last long until it went on its bull-run. The recent pull back now gives us a somewhat unlikely second chance for a good entry on a project that should shoot up to the top five sooner than later. From all I am seeing, ICON is very likely shaping up to be one of the few clear winners after an inevitable consolidation of the crytpo market that will happen some time down the line. Their vision plays to the strength of blockchain technology and with an intricate governance system, a network set up to scale through their use of AI, layering, node distribution and the SCORE system and some of the strongest partners in business and local government, they sure look like they are ready to execute it.
In the current market, it would be good to have some BTC ready and wait for confirmation. We could either go back to retest the trend line or break out into a full bull run. Both of those scenarios would mean that $ICX could drop a bit more from here with most of the other alt coins. Still, out of all the alts in the top 25 of coinmarketcap, ICX got hit the hardest during this pullback.¹⁴ If a friend entering crypto today would ask me where to put his money, I would say ICX.
Possible catalysts for the beginning of an ICX rally could be a listing on a Korean exchange (Coineone is owned by DAYLI for example), the announcement of new partnerships or even a more formal presentation of the existing ones while hooking up more and more existing communities to the Nexus and the ICOs that will drive demand for the ICX tokens.
***DISCLAIMER***
This is a complementary research for KoreanJewTrading’s video on ICON (https://www.youtube.com/watch?v=JoRiCQgnPAA) and appeared first as exclusive content in the Crypto Dojo (www.kjcryptodojo.com/).
This is not financial advice, please do not invest more than you can afford to lose.
If you have further questions or want to discuss anything presented in this article, you can find me on twitter @Stillman_Crypto
Endnotes:
¹ https://i.redd.it/6f7tjl5gtdd01.jpg
² ICON whitepaper, p. 5. (https://www.icon.foundation/resources/whitepaper/ICON-Whitepaper-EN-Draft.pdf)
³ The features of a rhizome are fascinatingly reminiscent of the idealist ideas behind blockchain technology: It “ceaselessly establishe[s] connections between semiotic chains, organizations of power, and circumstances relative to the arts, sciences and social struggles. The fundamental characteristics of [the] ‘Rhizome Model’ is as follows: Connection and Heterogeneity: any point of a rhizome can be connected to anything other, and must be. […] (3) A signifying Rupture: a rhizome may be broken, but it will start up again on one of its old lines, or on new lines…” (Kouichi Kishida, Towards Innovative Software Projecs — Creating Environments Supporting Innovation and Improvement, in: O’Connor/Pries-Heje/Messnarz (Eds.), Systems, Software and Services Process Improvement, Berlin/Heidelberg 2011, p. 265.
⁴ Shoutout to BlockchainBrad for his awesome interview with Min Kim. He certainly did not shy away of some tough questions: https://www.youtube.com/watch?v=1pKyg3cjVm4
⁵ Deloitte (12/05/2017), Blockchain to blockchains: Broad adoption and integration enter the realm of the possible (https://www2.deloitte.com/insights/us/en/focus/tech-trends/2018/blockchain-integration-smart-contracts.html)
⁶ Whitepaper p. 41.
⁷ http://spec-rationality.com/wp-content/uploads/2018/01/Network-of-Networks-_-Spec-R_RGB.jpg Spec-Rationality offers an incredible wealth of information about ICON and lots of it is presented in charts like this. Go check it out!
⁸ Reddit user PrimitiveTool makes a good case for this viewpoint in his well-researched post from December 2017: https://www.reddit.com/r/helloicon/comments/7lrou2/iconicx_is_not_the_korean_ethereum_it_is_the/
⁹ “CHAIN ID goes beyond merely replacing Korea’s outdated banking certificates”. Said Jonghyup Kim, CEO of theloop, and a leader in Korea’s blockchain community. “It puts blockchain into the pocket of every Korean, setting the stage for widespread use of blockchain-based transactions in a new blockchain-powered financial eco-system.” (https://medium.com/helloiconworld/icon-koreas-online-banking-security-gets-first-upgrade-in-almost-20-years-4d36f5ac31f1)
¹⁰ (https://blog.kyber.network/new-strategic-partnership-announcement-kyber-network-icon-78bd0f572820)
¹¹ I will mention a contractual relationship that ICON has with SBI/Ripple Japan in order to set them up with banks in Korea. It is not an interoparbility partnership per se as far as I understand but it clearly shows just how tight ICON’s grip on the Korean banking sector actually is.
¹² (https://steemit.com/icon/@roosterred/icon-icx-ico-a-promising-coin-with-major-flaws)
¹³ Forbes.com, Could this Blockchain in Korea be the first to connect an entire Country? (https://www.forbes.com/sites/elaineramirez/2017/08/09/dayli-icon-blockchain-south-korea/#2affa11725a7)
¹⁴ https://www.coindesk.com/theft-hit-nem-nosedived-wasnt-februarys-big-crypto-loser/
