Overnight Crypto Sensation Sets Out to Undo Internet’s Failings

The cryptocurrency that shot to a more than $45 billion valuation since it began trading on Monday could be just the tip of the iceberg for a new type of blockchain that hopes to remake how people interact with the world wide web.

While the surge in the value attracted headlines, the Internet Computer project run by the Dfinity Foundation and its founder Dominic Williams has actually been in development for several years. The goal is twofold -- to improve the slow pace of most blockchain technology and remove gatekeepers like Amazon Web Services as the centralized, for-profit entities that both blockchain and websites rely on. The token, dubbed Internet Computer Price, or ICP, allows holders to govern the network.

Overnight Crypto Sensation Sets Out to Undo Internet’s Failings

While the Ethereum blockchain has become the world’s most used, it is considered slow due to how its software is stored on thousands of separate, but linked, computers all around the world that have to agree on the state of the network. That means Ethereum processes about 30 transactions per second. And while Ethereum is decentralized, the computers running its network rely on cloud-based computing services from tech giants like Amazon and Google.

“The problem Dfinity is addressing extends beyond just blockchain technology,” Mira Christanto and Wilson Withiam, analysts at Messari, wrote in a research note this week. “It’s addressing the issues plaguing traditional internet, such as relatively low data security and an oligopoly consisting of big tech companies.”

Both Ethereum and the Internet Computer are base level protocols, meaning they are the backbone that applications run on. They are both based on nodes, the computers that run the software that creates the linked global network.

On Ethereum, smart contracts are created by developers to execute code for anything from creating a new cryptocurrency to operating a decentralized exchange or minting the newest non-fungible token. Ethereum users must use Ether, the cryptocurrency, to pay for transactions. It’s open source, meaning any developer who wants to work with it has access. Ether reached its all-time high of $4,379 on May 12 and has gained an astounding 445% this year.

Internet Computer is taking the Ethereum approach but applying it to the internet in general. It wants to allow developers to launch their software directly to its network that it claims can’t be controlled or manipulated by corporations like Google, Twitter, Facebook or Amazon. The ICP token reached a high of $713 on May 10 but has since settled to around $300, according to CoinMarketCap. ICP must be used to access the network.

Overnight Crypto Sensation Sets Out to Undo Internet’s Failings

“Like Ethereum, this platform would allow developers to run computing applications on decentralized infrastructure,” Christanto and Withiam wrote. “Unlike Ethereum, the IC intends to offer companies the efficiency to run these applications at scale and the flexibility to build them to fit a particular user base’s specific needs (e.g. privacy).”

Olaf Carlson-Wee, the founder of cryptocurrency investment firm Polychain Capital, first bought ICP tokens about three years ago, he said in an interview. The cryptography breakthroughs Williams and the Dfinity team made are what first caught his attention.

“Dfinity is the most important technology launched since Ethereum,” he said. “People like me in the crypto world recognize the magnitude of the technology breakthroughs Dfinity represents.”

The network is only four day old, however, so it doesn’t have a broad developer community behind it comparable to Ethereum or many applications that run on its system. The data centers that host Dfinity nodes will be open to anyone who has the technical skill and hardware necessary to meet the Internet Computer’s standards, Carlson-Wee said.

Even with the changes Ethereum is going through to improve its speed and performance it won’t be able to compete with what the Internet Computer will enable, he said. “Dfinity will enable novel types of apps that aren’t possible to build on any other blockchain,” he said.

©2021 Bloomberg L.P.

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