ICON (ICX) Analysis – Hyperconnecting the World

Already being dubbed the “Ethereum of Korea”, the ICON (ICX) project is a smart contract protocol that wants to “Hyperconnect the World”. ICON aims to build an ecosystem of different blockchains in varying industries and communities, and in the process remove the need for expensive intermediaries. Over time, this should build up into a vast interconnected network, while being both faster and cheaper to manage than traditional iterations. In essence, ICON will allow smart contracts to interact across blockchains by being managed by a higher-level smart contract, based on so-called loopchain technology, as illustrated below.ICX smart contracts overview

ICON is engaged with various industries, such as hospitals, universities, banks, insurance companies, and securities firms. Tying these normally completely disparate communities together under one ecosystem would enable faster, cheaper, and more efficient transacting of communications, finances, and data between “worlds”; with smart contracts being able to take over a vast workload and automate proceedings, and the blockchain network generally enabling safer communications and handling of sensitive data.



The Protocol

ICON’s primary goal of connecting separated blockchains into one overall blockchain ecosystem requires a fairly complex setup. The proprietary loopchain technology is the core fundament behind the system, with loopchain being powered by Loop Fault Tolerance (LFT) consensus, which is intended to be faster and more efficient than most other Byzantine-based consensus algorithms – here’s a good LFT primer from a more detailed technical perspective.

Five main parties further make up the network: Communities, C-Nodes (community nodes), C-Reps (community reps), Icon Republic, and Citizen Nodes. The following is somewhat simplified, for the full explanation please consult the ICON whitepaper.

Community

A Community is one individual network of nodes that makes up one governance system (the overall set of rules, consensus, and regulations that are specifically in place for one group) of the overall ICON network; financial institutions, schools, healthcare providers, insurance providers, and more, can be classified here.

Community Nodes (C-Nodes)

C-Nodes make up part of the node network of their own community, while being responsible for governance and upkeep of their blockchain. Due to the changing nature and wishes between each of the blockchain communities, C-Nodes can act very differently from blockchain to blockchain, and may use their own consensus algorithms or rules that the community agreed on.

Citizen Nodes

Citizen Nodes are the route via which the regular ICON user would connect to the network. These nodes can be the connection to DApps on the platform and for users to create transactions, though they possess no governing power.

Community Representatives (C-Reps)

C-Reps act as the elected officials for individual communities. Communities vote for their C-Rep, and the Rep then has to take control of governing matters – such as transaction verification – similar to how delegates act within a Delegated Proof of Stake (DPoS) system – and they are rewarded with ICX in the same manner. C-Reps are not permanent positions and can be transferred.

ICON Republic

ICON Republic is the “hub”, of sorts, for all the various communities on the ICON network. C-Reps are responsible for making and managing this connection. All of the above is powered by ICON’s “Nexus” multi-channel blockchain, which is itself based on loopchain. Loopchain uses a Loop Fault Tolerance (LFT) consensus algorithm, which is very similar to a DPoS system, where C-Reps are “delegates” for their own communities on the network. They vote on cross-network reward policies, resolve discrepancies, vote on currency issuance, and generally help maintain network integrity. In essence, when a transaction is broadcast, C-Reps check if a transaction is valid, and if so, they send it on to the other C-Reps who continue checking and add it to the chain. Every Nexus blockchain can be further connected to several other Nexus blockchains, growing the ecosystem.

ICON Nexus blockchain

SCORE

Score, or “Smart Contracts on Reliable Environments”, ensures high-performance smart contract execution since it runs directly in real runtime but not a separate virtual machine, unlike other platforms such as Ethereum. It is “executed on a runtime based on a container separated from basic blockchain process, so the basic blockchain process can still function properly even if there is problem with Smart Contract”.

The ICON DEX

Integrated within the ICON network will be its own decentralised exchange (DEX). This will allow communities to exchange value across blockchains and between one another, something that previously would require a step out of the “loop” between disparate communities, but in this case will allow a user to remain within the ICON ecosystem. An A.I. analysis model is used to set a real-time exchange rate, and ICX itself is used as an intermediary currency, helping give the token real utility in the system.

However, one of the main issues with current decentralised exchanges is liquidity – being able to make a sale or trade when needed can be a problem with a DEX, due to most of them lacking the ease of use and support of centralised exchanges, which leads to a lack of users. ICON has found a novel approach to solving this problem; instead of the usual DPoS-like system whereby delegates pay out rewards to those under their governance, ICON will reward users for using their DApps – including the DEX – helping bring enhanced liquidity to the network. Whether or not this will be enough remains to be seen.

Additionally, ICON has partnered with Kyber Network – a blockchain-based DEX – for cross-chain exchanges, which will further help with the issue of liquidity and access to more coins and tokens.

As touched upon before, ICON will use AI to calculate exchange rates and currency reserves, as well as the Incentives Scoring System (IISS), which calculates the ICX reward for every node’s contribution to the ICON network.

Decentralised Apps (DApps)

As with other blockchain platforms, ICON will also be able to host DApps, which anyone with a Citizen Node can gain access to and download. Some of the apps that will be available can be seen in the Roadmap section.

Team and Partnerships 

The ICON (ICX) project was started by Dayli Financial Group, a Korean fintech company with a number of startups under them, which already has a valuation itself of over $4 billion. Under Dayli Financial sits Dayli Intelligence, an operating branch of Dayli Financial, and under Dayli Intelligence are both theloop (the team who developed the proprietary blockchain infrastructure for ICON and have a huge blockchain development background), and DAVinCI (who have a focus on artificial intelligence and will analyse data to optimise the ICON network).

DAVinCI already have working partnerships with AXA Insurance, Samsung Card, Hyundai Capital and several other huge corporations, which will likely make cooperation with them on the ICON network easier in the future).

Though not exhaustive, here are some partnerships ICON already has in place:

Finance

The ‘Korea Financial Investment Blockchain Consortium,’ a blockchain consortium backed by 25 securities firms, is the first group to implement loopchain technology, and is already using the Chain ID service for autonomous authentication and generating and verifying of digital signatures. The implementation of ICON should speed up the clearing and settlement process for a stock transactions, which, due to traditional intermediaries and centralised institutions, can take 2-3 days – the US spends over $9 billion on this process every year.

Additionally, a partnership has been signed with Woori Bank – the 2nd largest bank in South Korea and a subsidiary of Woori Financial Group – whom the ICON team will be advising in the creation of a bank-issued digital currency which is tied 1-1 with the Korean Won, in the same way as Tether (USDT) is with USD, but in an auditable and trusted way.

 

ICON ICX securities use case

ICON in securities (click to enlarge)

Insurance

Sponsored by a government grant from the Ministry of Science, ICT, and Future Planning, an “Insurance Consortium” has been created, led by Kyobo Life Insurance (one of the big 3 life insurance companies in South Korea). The trial involves automatic insurance claims carried out on the blockchain – for the first time in the insurance industry. Small claims of under 1 million Won (roughly $925) will trigger the hospital to automatically send a copy of medical records to the insurer, with everything being written into the blockchain, and the claim filed and reviewed in roughly a day – something a Kyobo Life official commented on by saying: “It seems that the number of people who have been unable to claim insurance claims because they are busy and burdened is likely to decrease.” This is currently only being trialled alongside three hospitals, but Kyobo Life plans to roll the service out to all major hospitals in Seoul by Q3 2018 – already demonstrating how useful this cross-industry and cross-blockchain connectivity truly is.

Healthcare

Precision Medical Hospital Information System (P-HIS) is the name for the largest healthcare blockchain consortium in South Korea, for which loopchain will provide the technological foundation. This includes major hospitals such as Ajou University Medical Center, Samsung Medical Center, Severance Hospital, and Gacheon University Gil Medical Center.

The ability for medical data to be efficiently stored and shared between hospitals, and also to insurance providers as mentioned above, would be highly beneficial to the industry as a whole. With ever-more information becoming available to us about our health and bodies, in the form of sensors and even more radical changes such as genetic sequencing, it will become increasingly important for this data to find a safe home.

ICON ICX hospitals use case

ICON in hospitals (click to enlarge)

University

U-Coin (“University-Coin”) is the name of the cryptocurrency that is currently being trialled at three South Korean universities (Korea University, Sogang University, and Sohang University of Science and Technology), with a further 7 universities to be trialling it by Q3 of 2018. To begin with, the coin has fairly limited uses, for example to pay for scholarships and tuition fees, and buying snacks in vending machines on campus, but the plan is for the ecosystem to be further extended even beyond the campus, such as to local university towns and communities. Having the coin on the ICON network and introducing students – being the perfect demographic for this kind of innovation – to the ecosystem is a smart idea, even if this aspect of the project is much less interesting to us compared to the other industries.

ICON ICX universities use case

ICON in universities (click to enlarge)

Information on U-Coin and its technological background is limited at this point, but it is quite possible that the goal is for an entire campus management ecosystem to be built around it. How students use their scholarship funds, for example, could be tracked (and limited), and optimisation of supplies, scholarships, and fees could more easily take place, or even be automated.

Blockchain Interoperability Alliance

ICON, AION, and WAN all came together in December 2017 to form the BIA, in an effort to capitalise on the individual advantages of each project. ICON, as we have discussed, wants to “Hyperconnect the World” by building the largest blockchain ecosystem in the world. AION, as we have already written about, is looking to become a common protocol for all blockchains to connect between one another, while WAN is building a system to allow digital assets to be securely transferred and exchanged across any blockchain system; if they all achieve their individual goals, this partnership would lead to an instant advantage to all parties, as they fit together ideally. AION would potentially give ICON the ability to connect to any AION-compliant blockchain, which should grow over time and remove most global barriers for ICON.

The above is just a general overview of the sectors ICON is focusing on, some more partnerships can be seen in the image below. We will also be posting a more detailed look into ICON’s partnerships soon.


ICON (ICX) partnerships

Economic Model

A total of 400,228,750 tokens have been minted, with roughly 387 million being in circulation at the time of writing. 50% of tokens went to the public during ICO, and the remainder was allocated as follows – 14% to the Foundation, 10% to Community Partners, 10% to the Team and Advisors, and 16% held in reserve. Another 400 million tokens were to be minted after the mainnet launches (which has already taken place), and are to be released via a reserve channel, according to a community-driven algorithm which will take several factors into account (such as trade volume and fees), rather than the ICON team being in charge of this. The fact that the majority of the initial 400 million ICX tokens are already in circulation, and the remaining 400 million are to be released via the community-driven algorithm is encouraging, as it should help prevent price depreciation if the coins were to be freed up quickly, but it depends at which rate the remaining 400 million are eventually released into the circulating supply.

As mentioned before, the ICX token itself has utility and is usable on the platform; for example, according to a developer’s technical Q&A from Reddit:

ICX enables transactions among different cryptocurrencies by determining the exchange rate through DEX Reserve. Second, ICX can be used as for DApp tokens U-coin, which is a DAPP developed by our blockchain team for Korean University Consortium, can be one of these use cases already in development. Another example – ICX can be a token for ICO platform like ERC-20.”

This utility should drive further demand for the token, and the fact that, as mentioned in the protocol section, the ICON Foundation actively wants to encourage usage of the platform – for much of which ICX is required –  should further ensure that ICX is actually in demand on the platform. Additionally, according to the whitepaper, every transaction will incur a fixed 0.01 ICX fee, but this will change depending on the complexity of the transaction. Via the DEX, other tokens can also be converted in order to pay any fees – once again driving demand for ICX.

Roadmap and Advancement

The ICON team has been pushing towards several primary tech targets early this year, though several have not been realised as of now.  The ICON mainnet was launched in late January, when the Genesis Block was generated and all ICX minted.

The intention was for the ICX coins – which are currently ERC20 tokens – to be swapped to native ICON mainnet ICX tokens soon after the mainnet launched, however, that hasn’t taken place yet due to the team wanting the swap feature on exchanges and the ICONex Wallet to go live simultaneously, to prevent a situation where there are two versions of ICX being traded at the same time. This however does mean that the ICONex wallet is live in the form of a Chrome extension, with a mobile version still being worked on. The wallet and wallet addresses will also have an interesting addition in the near future, the “ICONick” update, which will allow wallets to be given a more memorable address in the form of your chosen wallet ID – a system that would undoubtedly be welcomed across all cryptocurrencies.

ICON, similar to other platform projects, will also have a fully-fledged ICO platform which is to be launched on the 30th April, alongside the planned DEX (ICX/ETH) launch. As the mainnet has launched, the DApps of these ICOs will be launchable; below you can see a list of upcoming DApps and their uses, taken from their Genesis Update.

Stove (Smilegate) A social platform producing and distributing a variety of digital contents, including games, built by Smilegate, a global online gaming company listed on the Guiness Book of World Records for number of concurrent users of CrossFire.

Bluewhale A decentralized ecosystem of sharing economy for workers to receive fair rewards.

TINK A distributed application that helps your friends give credence to your social profile by making anonymous vote on what they like and think about you.

Silkroad A platform that supports transparent history management and purchasing by reforming the semiconductor supply chain and SCM into a blockchain-based decentralized system.

UPPSALA Security Intelligence Platform for Blockchain (SIPB) which aims to overcome the disadvantage of decentralization by turning it into an advantage of security.

AD4th A decentralized advertising platform with real-time P2P reward system.

NucleusVision An IoT-based, contactless identification system that empowers retailers to identify and better serve their customers.

In terms of what is to come, here are some highlights for 2018:

By the end of Q3 of 2018 Governance Channels should come about, allowing communities to run more autonomously, and IISS incentives to node holders will be improved. Q4 will see improvements to the SCORE system.

Throughout 2018 there should be a stable launch of the healthcare data sharing platform, while the Korea Financial Blockchain Consortium is to further implement the Chain ID (and associated security) system in the clearing and settlement sectors, and in the trading sector in 2019.

Potential

An inherent barrier for ICX is simply that it is a platform, and has plenty of competition to contend with – Ethereum, Bancor, EOS, HPB, and more – they all want a slice of the pie. However, this doesn’t mean they don’t have the ability to pull it off.

The team itself appears more than capable, with backing by Dayli Financial, Dayli Intelligence, and the strong blockchain background of theloop team giving us confidence that they will be able to pull off the technical aspect of the project.

The partnerships with financial, insurance, and medical consortiums demonstrates that major companies see the merit of the systems already offered. Alone the example of the insurance consortium having the ability to securely receive the medical data of their customers and review the case in less time than the previous system allowed, is an important use case, and when scaled across all sectors that ICON is working in, as well as when combined with other elements such as Chain ID, the DEX, and various DApps that will launch over time, we can see the potential for an intricate ecosystem to develop.

With ICOs being launchable via the ICON platform we should also see an uptick in what services are running on the platform, as well as demand for the token over time; both ETH and NEO saw huge increases in demand as their own prominent ICOs were launched, and we expect the same to be the case for ICON.

The DEX launch is a highly anticipated event, and for good reason in our opinion; with regulation still in the air and access in certain countries difficult, having a fully-fledged DEX baked right into the ICON platform is a definite advantage, and will also help with elements of the ecosystem (such as fees being instantly payable by exchanging different cryptocurrencies).

One element to the project that can be seen somewhat as a double-edged sword is the fact that it is so heavily focused on the South Korean market. As a testbed for the technology and implementation of ideas South Korea is perfect – especially as it is consistently ranked in the top 5 ICT (information and communications technologies) countries in the world – but ICON needs to have a more global vision if it intends to compete with the likes of Ethereum, NEO, and EOS – not just to scale their business but also to protect against potentially detrimental changes in South Korean crypto policy (as unlikely as this may be to happen, given their funding of certain elements of the project). However, with the partnerships with global brands they already have in place, it isn’t too far-fetched to assume that if good progress is made in South Korea, the project should have easier avenues onto the global market as a result of it. Being a homegrown monopoly is far from a show-stopper.

Additionally, the fact that the project is part of the Interoperability Alliance – allowing connections across separate blockchain ecosystems – and that they have a strong focus on South Korea, means that DApps running on other blockchains and targeting South Korea might not need to be rebuilt on ICON, allowing the network to scale at a faster pace.

Final Thoughts

The ICON project looks like it’s stacking up to be a major contender in the battle to make it to the top 10 cryptocurrencies. With a standout background in both the founding companies and the teams themselves, as well as a number of high-profile and impressive partnerships already existing, ICON has positioned itself well for growth in 2018, as well as for being one of the leading blockchain platforms.

With major partnerships and trials already successfully underway, it can be seen that the underlying technology behind the project is sound, and real progress has been made. While we are still in the very early days of the project, once all of the pieces come together we will be able to see if this connection of industries and communities runs as smoothly as envisioned; what is for certain, however, is that the team looks like it is making real progress – barring some minor delays – and by the end of 2018 we should have a much clearer idea as to whether the project is functioning appropriately.

Up until now, projects working on building a blockchain infrastructure seem to be some of the biggest winners in the space, and ICON aims to match what they do, as well as adding extensive blockchain interoperability from early on. This combination of a solid team, innovative technology, impressive partnerships, and being based in the perfect growth testbed in the form of South Korea makes ICON an attractive prospect, and we look forward to seeing what more they bring to the table over the course of 2018.

As always, this is not financial advice. This article is based on personal opinion, and we advise everyone to read ICON’s white paper, and check through their official webpage, before investing. Do your own research, and consult a financial advisor if needed.

Disclaimer: We are long ICX.


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