What it means
ICON launched through an initial coin offering (a fundraising method where a project sells new tokens to the public) in 2017. Its stated aim was to build a network of networks, so that different blockchains run by separate institutions could communicate.
The project was developed by the ICON Foundation, with a related company, ICONLOOP, building enterprise blockchain technology. The ICX token has several uses.
It pays for transactions and smart contract operations on the network, and holders can take part in governance by staking, which means locking tokens to support the network's operation and decisions. The design of the network and its governance rules have changed over time, so readers should check the project's current documentation.
For businesses, the interest lies in the idea of interoperability, the ability of separate systems to work together. A bank, an insurer and a hospital might each run their own blockchain, and a connecting layer would let them share verified records without handing control to a single outside party.
This remains a goal that many projects pursue, with mixed progress. From a finance perspective, a cryptocurrency like ICX is a high-risk asset.
Its price can swing by large percentages in days, it is affected by news about technology, regulation and general market sentiment, and trading volumes can be thin compared with major currencies. Investors should only commit money they can afford to lose.
Accounting and tax rules for cryptocurrency differ by country and change over time. Companies that hold tokens generally need to decide whether to treat them as intangible assets, inventory or financial instruments under their local rules, and gains may be taxable when tokens are sold or exchanged.
Professional advice is essential before holding or accepting tokens. Due diligence for any token includes reading the project's published documents, checking who runs it, understanding how many tokens exist and how they are distributed, and seeing whether real organisations use the technology.
A lack of genuine use is a warning sign, however good the story sounds.
In practice
Real-world examples.
Example
A technology consultant reads about interoperability projects and researches ICON before deciding whether to buy a small amount of ICX. She checks the circulating supply, the foundation's reports and trading volumes, and decides to limit her purchase to 1% of her savings.
Example
A university IT department runs a pilot in which student certificates are recorded on a blockchain. The team compares networks, including ICON, on cost, speed and support, and records its findings in a procurement paper.
Example
A company accountant is asked how to record tokens received as payment for services. She follows the company's local accounting rules, notes the token's value at the date of receipt and records later changes in value as the rules require.
Formula
Calculation
Market capitalisation = Token price x Circulating supply
Fully diluted value = Token price x Total supply
These figures are hypothetical and chosen for easy arithmetic, not current market data. Suppose a token trades at $0.50 with a circulating supply of 600,000,000 tokens. Market capitalisation is $0.50 x 600,000,000 = $300,000,000. If the total supply is 800,000,000 tokens, the fully diluted value is $0.50 x 800,000,000 = $400,000,000. If the price halves to $0.25, market capitalisation falls to $0.25 x 600,000,000 = $150,000,000.Case study
Seen in the real world.
Harbour Analytics is an illustrative, fictional consulting firm whose director, Selin, was asked by a client to compare several blockchain projects, including ICON, for a data-sharing pilot between three hospitals.
Selin built a scoring sheet covering technology, cost, regulation, community support and real-world use. ICON scored well on enterprise features but the team noticed that adoption outside a few pilots was limited, and that the token price had fallen far from its early peaks.
In this illustrative story the hospitals chose a smaller pilot that did not require them to hold any token, and agreed to revisit the question after a year. Selin's report concluded that the technology could be useful, but that price movements in a token should not drive an infrastructure decision. The lesson is to separate the usefulness of the technology from the speculation around the coin.
Watch out
Common mistakes.
- Judging a project by its token price alone, when price reflects speculation as much as use.
- Investing more than you can afford to lose in a volatile asset.
- Ignoring tax and accounting obligations when receiving or selling tokens.
Questions
People also ask.
What is ICX used for?
It is used to pay for activity on the ICON network, to take part in governance by staking and, for some holders, as a speculative asset.
Is ICON the same as Bitcoin?
No, ICON is a separate network built to connect blockchains, while Bitcoin is a payment network and store of value with a different design.
Is ICX a safe investment?
No cryptocurrency is safe, because prices are volatile and regulation is uncertain, so research carefully and consider independent advice.
From the founder's library
Take it further with the book.
Build your financial confidence beyond this definition. Shihan's full-length guide, Accounting Fundamentals, takes the same plain-English approach and turns it into a complete, practical playbook for non-finance managers, business owners and students - with chapter-end quiz answers and presentation slides included.
25% off with code MMHQ25, applied at checkout. Priced in USD - checkout may show the equivalent in your local currency.
View the book and save 25%Related