May 052021
 
How to buy ICP token from Dfinity

This is a guide on how to buy ICP Token from Dfinity, dubbed the Internet Computer. After a wait of half a decade, Dfinity is releasing a public launch of its network and also its ICP token which powers the internet computer. The genesis launch took place on May 7th 2021. ICP is expected to start trading on May 10th 20211 at 10am PT. Therefore, you should be able to buy ICP tokens starting this date. ICP stands for Internet Computer Protocol.

Since I am getting a lot of questions on this, the only legitimate place to buy ICP right now (pre-launch) is FTX which supports ICP perpetual futures contract. This is the most liquid with best price discovery by far (not the IOU from MXC). Sign up and trade on FTX if you want exposure to ICP pre-launch. No KYC for up to 2000 USD withdraw per day. VPN friendly. Don’t buy MXC stuff. Otherwise, just wait for regular exchanges (see below)

But first, let’s dive deeper into Dfinity, its vision, and how to relates to the broader blockchain and crypto ecosystem.

What is Dfinity?

Dfinity has been building an “Internet Computer” since 2016-2017 and has raised several billion dollars from VCs like A16Z in the process. It has several unique features such as how nodes come to a consensus and how data is treated inside the network. We suggest doing some reading on their blog as the details are hard to summarize. If Dfinity can do 10% of all it promises, it could be a game-changer.

Dfinity hopes that popular apps like Facebook and TikTok will be recreated on a decentralized network and the Internet Computer is ready to handle any load. It is far easier for developers to manage since compute and storage are managed in a single place and scaled by the Internet Computer, which means the developers don’t need to manage things like databases, firewalls, load balancers, etc.

What is ICP Token?

The ICP token is the native token of Dfinity. You can stake the ICP token for governance and collect fees. This isn’t a gimmick like several other governance tokens. Besides, you’ll be rewarded the more the network is successful, which aligns the interests of token holders and network users and builders well.

Dfinity did an ICO or crowdsale in early 2017 where it raised around $4 million in crypto. According to an older blog post from Dominic Williams the founder and chief scientist at Dfinity, the crowdsale participants will collectively own 24.72% of the network at launch.

In addition, Dfinity did a broad community “airdrop” via CoinList in 2018. Those users get 1.25% of the entire network. Every participant here would have 119 ICP in their CoinList account. CoinList is well known to mess up big launches and we don’t expect the ICP launch to be any different. Therefore, expect some early troubles.

In addition to the crowdsale, Dfinity has raised several billion dollars from some of the most prominent venture capitalists in Silicon Valley, most notably A16Z. A16Z has led multiple successive rounds for Dfinity over the years, which proves their deep conviction in the project (in addition to providing a way to deploy their hundreds of millions of dollars in a single shot).

That in a nutshell is how ICP will be distributed prior to the launch.

What are ICP’s Tokenomics

ICP (previously DFN at crowdsale) is both a governance and utility token inside the Internet Computer ecosystem. Therefore, if you are a developer who wants to build on Dfinity’s Internet Computer, then you will buy some ICP and convert them into cycles. This is somewhat analogous to how gas works in Ethereum i.e. you need to pay for compute using the native token.

However, if you want an upside in network ownership instead, you will lock up your ICP into what is called “Network Nervous System” (previously blockchain nervous system) or NNP. This creates “neurons” that can then be used for network governance. Governance actions will earn voting rewards inside the network.

Therefore, there are two inflation sources:

  • Paying nodes for compute (data centers for example)
  • Paying governance participants

and there is one deflation sink:

  • Burning ICP when it is converted into cycles by app developers

Voting rewards are higher for higher lockups. There is a complicated governance system via NNS which we’ll cover in more detail in a later post. App developers will need to know how to buy ICP tokens to make sure their apps are functioning right. This creates a continuous demand for ICP token. Depending on the usage, ICP could end up deflationary which would be a first in the space (other than possibly Ethereum’s EIP 1559 being adopted and gas remaining high).

Node operators get ICP payments but denominated in “cash equivalent” units. This is understandable because node operators have fixed hardware costs determined in USD or local fiat equivalent, not in ICP. Voting rewards are denominated in ICP though since these are longer term stakeholders of the project.

ICP tokenomics

ICP inflation for governance starts at 10% of total supply and drops to 5% of total supply by Year-8. There is no information on inflation numbers for data center rewards yet.

How to Buy ICP Token from Dfinity

ICP has been released. The previous holders of DFN tokens via the seed round can access their ICP by following the instructions in this post. Airdrop recipients via CoinList will receive their ICP drop vested equally over 12 months.

Coinbase is listing ICP token at launch. This is probably the simplest way to buy ICP at launch. This of course was not the least bit surprising since A16Z is one of the largest investors in both Coinbase ($COIN) and Dfinity ($ICP). Note that after you sign up for Coinbase, you’ll need to log into Coinbase Pro in order to start trading ICP. It is expected that regular Coinbase users can buy ICP in the future, but the launch is on Coinbase Pro.

You can buy ICP futures on FTX which is the easiest and most liquid way to get leveraged exposure to ICP at launch. FTX’s perpetual futures are the simplest way to leverage up your ICP exposure. They are far more reliable for futures trading than Binance. You can leverage up to 100x, but please don’t do that unless you really know what you are doing. Keep it at a more modest 2-10x.

OKEx has announced it will list ICP token at launch (and also a $10MM fund to support the ICP ecosystem)

Kucoin will also be trading ICP at launch, with ICP/BTC and ICP/USDT pairs.

Binance is expected to list ICP soon after launch.

CoinList, which hosted the 1.25% community airdrop in 2018, is also expected to launch ICP trading. However, due to their poor ability to handle loads combined with poor liquidity and poor user experience and hard to complete KYC requirements, we suggest using other exchanges to trade ICP. If you are an airdrop participant though, you will need to go through CoinList to get your ICP. If you want to sell your ICP, it may be better to transfer it out to another exchange and then sell for BTC or USDT/USDC or another supported pair.

A bunch of smaller exchanges might list ICP after launch too. We’ll update the post over time to include them.

Warning: Be aware that ICP is not an ERC20 token and therefore does not exist on Ethereum. It is the native currency of the Internet Computer by Dfinity. Expect a bunch of scam ERC20s to launch on Uniswap. Don’t fall for them and stay safe out there.

Dfinity ICP Circulating Supply

The ICP circulating supply is a bit of a complex topic. This is because not all ICP is tradable in the markets. There is a lockup of ICPs in the form of neurons, and there is a “dissolve delay” before which ICP from these neurons can be obtained by a user in their wallet to sell on the markets. This mechanism is a bit different from other lock/stake protocols.

At genesis, the ICP token supply is expected to be 469,213,710 ICP i.e. about 469 million ICP. Circulating supply will depend on network conditions and economics, but is around 26% i.e. around 122 million ICP.

Not all of this is going to be liquid, however. The team has not been upfront about how many will be locked up in neurons and what the dissolve delay will be set at and whether the seed and institutional investors will get one neuron per entity or multiple. Therefore, there are a lot of questions about liquid and circulating ICP supply at launch that the team has failed to answer adequately. We’ll update this post when we get more details from the team about initial circulating supply numbers.

How to Earn ICP

The easiest way for everyday users to earn ICP is via voting rewards. If you run specialized data centers and willing to invest in dedicated hardware, that may be the better route to go. However, unlike other protocols like Filecoin, you cannot just contribute compute to Dfinity’s internet computer. Governance will need to approve every data center added to the network.

Therefore, for most users, voting (governance) is the way to earn ICP. Make sure to set the rules to delegate your votes so you don’t miss out on any rewards.

You can earn ICP by locking up your existing ICP into “neurons”. This is part of the “network nervous system” or NNS that forms the backbone of Dfinity’s internet computer.

In order to maximize your ICP returns, you should

  • Ensure that you are voting directly or in a delegated manner for every single vote.
  • Neurons lock up ICP. The more ICP you have locked up into your neuron, the more ICP your neuron will earn.
  • Dissolve Delay is like lockup. This can be set from 6 months to 8 years to earn governance rewards. If you set this to a maximum of 8 years, you get 2x the rewards compared to 6 months.
  • Age of neurons matter. Older neurons earn more ICP with a maximum of 25% bonus capped after 4 years.

Therefore, if you have a 4 year old neuron with 8 years dissolve delay, you will earn 2.5x more ICP than a neuron that was just created with a 6 month dissolve delay.

Dfinity makes it easier to compound. The network sends rewards to users in the form of new neurons. These neurons start with a dissolve delay of 1 day. You can therefore dissolve them immediately or simply increase the dissolve delay for your ‘child’ neurons. This is an easy way to compound your ICP to earn even more ICP but of course at the cost of reduced liquidity. Also note that neurons will not be tradable as trading them has security implications for the network.

Note: If you trigger to dissolve a neuron, when the delay is below 6 months, you will stop earning ICP tokens.

ICP Updates

If you want to watch the event live, register for the Dfinity mercury genesis launch event, including details on ICP token and when it unlocks. Event takes place 7pm CET / 10am PT on Friday, 7th of May 2021. ICP token will be released at 9am PT on Monday, 10th May 2021.

If you were a seed investor in Dfinity, here is a guide on how to access your ICP (warning: technically challenging. The team made it very hard for seed investors to access their neurons and ICP by not integrating with the app and instead using command line tools).

ICP and Dfinity Resources

The Dfinity blog is fairly comprehensive – we suggest giving it a read.

Some core posts are: details about ICP and its tokenomics and use for governance, technical overview of the internet computer, 20 year roadmap.

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