ICON is a platform on which one can build new tokens, with their own rules of governance and features. In this way, it is much like Ethereum and the ERC20 standard that allows for new tokens to be created on the Ethereum blockchain. Where ICON differs from ERC20 tokens is that all coins within the ICON ecosystem, called the “ICON Republic”, share an ability to be traded with each other without the need for going through an exchange, a form of a built-in atomic swap.
The republic is supported by what they refer to as a “loopchain”, which is the underlying ICON blockchain that interconnects all individual tokens. The loopchain consists of ICX tokens which are used as the intermediary currency between all other tokens. However, since exchanging between different tokens within the ICON Republic is all handled by smart contracts, transactions should effectively be instantaneous and seamless, giving the impression of direct conversion.
The goal of ICON is to create an overall environment in which companies can create tokens that suit their individual needs, and yet still be compatible with all other tokens within the ICON system, allowing for greater liquidity of assets. At the same time, the ICX coin will be a currency that people can use for purchasing goods and services.
One example they offer is of a person going to a hospital that is part of the ICON network. When the person’s visit is registered with the hospital, it alerts an insurance company that uses its own token. The insurance company may be using its own token for smart contracts to handle claims in particular way that is of no concern to anyone outside of that company. However, the insurance company, seeing that the hospital visitor is a member of their services, can issue its own tokens to the hospital or to the hospital visitor, and the hospital or visitor can receive them as a different token they find useful. For example, if the insurance company reimburses the hospital visitor, that visitor might choose to receive the tokens in the form of ICX, which they can then use to go to a coffee shop and buy a drink. Or they might opt to move the tokens into their university’s blockchain, where they also have their own token, using smart contracts or other token features to track students or course credits.
In the end, the ultimate goal is to create for everyone the benefits of custom smart contract solutions, while preserving the advantages that come with a common currency.
ICON is built much like Bancor, which uses a “delegated proof of stake” model. In ICON’s implementation, blocks are validated by people, called delegates, who vie for that status by committing tokens to what amounts to putting them in escrow. However, just committing tokens is not enough, that is essentially just nominating oneself for the role. One must also submit a proposal and exhibit skills necessary to running a node, and then one is voted into the position.
ICON also follows Bancor’s model of reserve backed tokens. Essentially, when creating tokens, one deposits a certain amount of money to ensure that no matter what, there were always be a value to the coin. If other people start buying the newly created token, driving up its price, a smart contract works to balance the price of the token with the amount in reserve.
ICON has a system in place where it can issue up to 20% of its current number of tokens within the space of one year. The amount of increase it is voted on by people called C-Reps who are delegates that act as representatives for individual tokens. In some years the growth could be zero, or 20%, or anything in between. This means its effectively an inflationary currency. If in any given year a number of new tokens equal to 20% of the existing supply, it means all current token holders have their holdings reduced by 20%.
ICON is backed by DAYLI Financial Group, a large Korean conglomerate, and has a robust network within Korea of banks, insurance companies, and government institutions. As such, they’re well funded and networked, so they have the resources to see themselves through market dips and other hardships that might be too much to bear for smaller startups.
Their promotional material often emphasizes hospitals and insurance companies, which in itself is a large market. Even if they stay within Korea, and within that one business sector, they could stand to increase in value a great deal. If they can break out of that niche and find wider adoption, then their growth could be very substantial.