What Is ICON (ICX)?

ICON is a blockchain technology and network framework designed to allow independent blockchains to interact with each other. ICON is supported through a cryptocurrency token, ICX.

Key Takeaways

  • ICON is a blockchain technology and network framework designed to allow independent blockchains to interact with each other.
  • Communities are connected to the ICON Network through a decentralized exchange.
  • Potential opposition from traditional centralized cryptocurrency exchanges is a major challenge facing ICON.

Understanding ICON (ICX)

The ICON Project developed a blockchain technology and accompanying cryptocurrency token called ICX. The organization bills itself as an interconnected blockchain network, allowing participants in a decentralized system to "converge" at a central point. That is done by connecting a community to other communities through the ICON Republic and Citizen Nodes.

While blockchains are most commonly associated with cryptocurrencies, enthusiasts point out other areas where the technology can be applied. Any exchange of information can technically be added to a blockchain, though adding some types may not be cost-effective. Transactions involving securities, currencies, business contracts, deeds, loans, intellectual property, and personal identification could be tokenized.

By default, blockchains are managed by a particular network, and connecting different blockchains has not been possible. ICON is an attempt at such a connection

Centralized payment systems, such as Visa, require businesses to adhere to policies and guidelines that they developed. By allowing individual communities to retain control of their own policies, ICON seeks to reduce potential barriers to adoption.

Communities are connected to the ICON Network through a decentralized exchange. That allows for the maintenance of a verified ledger shared within the community network itself. This ledger reduces the need for third parties, which can lower transaction costs.

Concerns About ICON (ICX)

While ICON has ambitious plans for connecting different communities, it also faces substantial challenges along the way. Firstly, many investors are used to traditional centralized cryptocurrency exchanges. It is true that such exchanges do not fit with the decentralized ideology of cryptocurrencies. However, the exchanges were still an integral part of the cryptocurrency market as of 2021. Many investors only buy cryptocurrencies that they can find at their favorite exchanges, which could create problems for ICX. Given the goals of ICON, many exchanges might not want to offer ICX to their customers.

ICON also faces stiff competition from other cryptocurrencies. ERC20 tokens on the Ethereum blockchain provide another way to exchange various assets on a blockchain. Furthermore, major cryptocurrency exchange Coinbase announced support for ERC20 tokens.

High levels of competition increase the risk that a particular cryptocurrency will fail to catch on. Diversification within the cryptocurrency space is a potential solution.

Goals of ICON (ICX)

The principal goal of ICON is to interconnect cryptocurrencies and other communities. ICON considers a community to be a network of nodes that follows a single governance system. Bitcoin, Ethereum, and other cryptocurrency networks are considered communities. So are banks, businesses, hospitals, schools, and governments. Communities can have different governance structures, numbers of nodes, and characteristics.

Communities vary in their approaches to decision-making, with the process managed by "Community Nodes." Some communities like Bitcoin take a consensus-driven approach, while other communities, such as financial institutions, follow a hierarchical approach.

ICON refers to decision makers as Community Representatives, with Community Representatives also having a say in how the community interacts with the ICON Republic.

The ICON Republic connects different communities. ICON Republic governance is determined by the votes of Community Representatives. However, the actions of the ICON Republic do not determine the governance of the separate communities themselves. The ICON Republic does, however, allow for the issuance of the ICON Exchange Token, ICX. Interested individuals who are not Community Representatives can participate in the ICON Republic, but they do not have voting rights.

ICON uses the concept of a loopchain to connect communities that are part of an ICON Republic. These communities, referred to as a consortium, determine a common set of rules that allow different blockchains to work together.

Each community's blockchain is linked through the Community Representative to the ICON Republic, with the ICON Republic's blockchain referred to as the nexus. The rules covering how the independent blockchains interact with the nexus is called the Blockchain Transmission Protocol, or BTP.

For example, a blockchain consortium of banks creates standards on how smart contracts can be authenticated without the need for third-party oversight. As the parties of each smart contract adjust, transactions are added to each community's blockchain.