Cycles are like gas
For developers building on the Internet Computer (ICP), there are two essential tokens: ICP and cycles, each serving distinct but interconnected roles.
ICP token
ICP is the Internet Computer's native utility token. It can be bought and traded on exchanges. It plays a central role in network governance (via token staking and voting) and economic operations.
Developers can convert ICP into cycles, which are then used to pay for computational resources on the platform.
Cycles
Cycles are similar to gas on Ethereum. They're used to pay for:
- Compute power
- Storage
- Network bandwidth
- Specialized features like HTTPS outcalls, threshold signatures, and the Bitcoin integration API.
The price of cycles is pegged to the XDR (an international reserve currency unit), where 1 trillion cycles = 1 XDR (~1.3 USD).
This stable pricing makes it easier to predict and manage operational costs.
The reverse gas model
Unlike Ethereum, where users pay for transaction fees, ICP uses a reverse gas model:
- Developers pre-fund their canisters (smart contracts) with cycles.
- The canister then uses these cycles to pay for the operations it performs.
Anyone, not just the developer, can send cycles to a canister. This model supports a seamless user experience by eliminating the need for end-users to hold tokens just to interact with dapps.
Canister resource consumption
Canisters consume resources when they:
- Store data
- Execute computations
- Send inter-canister calls
- Use advanced features like the Bitcoin API or HTTP outcalls