Demand for ICP

An intro to a new series

I’ve spent most of the past two months writing on the supply of ICP, primarily focusing on ICP dissolving off the NNS.  For the next two months I’ll turn my attention to demand for ICP and how it could drive the IC ecosystem and the price of ICP.  For starters, here are the current drivers for ICP demand:

1.       Computation – ICP can be burned into cycles to pay for computation on the Internet Computer.

2.       ICP Transactions – ICP can be used as a medium of exchange and each transaction requires a fee of 0.0001 ICP to be burned by the transaction initiator.

3.       Staking – ICP can be staked on the NNS, essentially locking the ICP for a period of time and providing the staker governance voting rights and rewards.

4.       Liquidity Pools – Markets in which ICP is the medium of exchange require ICP to be held in reserve by the market participants so that the market can operate efficiently.

My next four articles will go into a deeper analysis of these four sources of ICP demand, but for now I’ll just say that I expect all four of these drivers to play a role in 2022.

Note – I’m excluding from my analysis speculation on the price of ICP as a driver for demand because it is challenging to measure (and if I could measure and predict it, I would use that knowledge to trade ICP instead of writing about it 😊).  It’s clearly evident that speculation is a key driver of short term ICP price swings, however I think the above four sources of demand will be the key driver for medium and long term ICP price movement.