ICON (ICX) is an interchain network that connects multiple blockchains, with separate governance and operations, together without the need for an intermediary. In this sense, while it has often been called ‘Korea’s Ethereum’ (likely because of its capabilities to host Dapps and its connections to real world businesses), it is more comparable to blockchain projects like Hyperledger and Aion.
ICON is a project founded by the Dayli financial company, formerly known as the Yello financial group, an arm of the major Korean telecommunications company, Yello. ICON’s technology was developed by theloop. Understanding the network’s governance can be a little bit muddled with essentially the Dayli Financial Group, the Icon Foundation and theloop all being controlling forces behind ICON.
Source: ICON whitepaper
The above flowchart, taken from the ICON whitepaper, shows the process of interaction between two blockchains and ICON acting as an intermediary between the two. Blockchain A and B represent networks like Bitcoin and Ethereum.
Between blockchain A and B, the Nexus represents blockchain-based independent communities, which connect to the wider ICON ecosystem using C-reps (ICON’s term for masternodes).
Portals are the connections between the blockchains and notary channels are the transmission method used by the respective parties. ICON nodes manage the channels and verify and interact with the transactions passing through them.
ICON is able to manage the interchain transactions using an internal DEX (decentralized exchange) solution. The ICX token, and its internally held reserve, instantaneously converts transactions in real time. ICX’s DEX solution is based on Bancor’s currency conversion system. As such, ICX is built on smart contracts which manage the moving parts of this process.
So, for one of ICON’s interconnected networks like Unchain, a blockchain within the Line messaging App ecosystem, ICON’s solution let’s Unchain tokens and ICX be traded in real time, with Unchain tokens also capable of being traded instantaneously with any other token connected to the ICX ecosystem.
ICON’s use cases and strategy seems more oriented on integrating private payment solutions within the South Korean market i.e. the interoperability between private financial systems of schools, hospitals and universities (U-coin) within Korea. Based on these interchain possibilities, Dapps will be hosted on ICON to utilize the cross payment transactions capabilities of the blockchain.
ICON is highly centralized, C-reps/Masternodes/leaders will always be able to exert a large amount of control over the direction of the ecosystem, and the blockchain faces the same kickback that other ‘leader’ based protocols, like Ripple, tend to receive.
Exchanges and trading pairs
The most popular trading pairs for ICX are crypto-to-crypto ICX/Bitcoin and ICX/USD Tether. Transactions in BTC make up over 60% of the daily trading volume and over USD 20 million of 24 hour volume. The next most popular is fiat-to-crypto pair ICX/Korean Won, which caters to ICON’s local market. There are also options for on-ramps in US dollar, Indian Rupee and LA tokens.
By far the most popular trading for ICX/BTC is the world’s largest exchange by daily trading volume, Binance. It handles over 86% of the daily traded volume of ICX/BTC, and is known for high levels of liquidity and low trading fees. Major Korean exchanges, Bithumb and Upbit, list options for ICX/KRW, handling 67% and 33% of the daily trading volume respectively.
Interchain Consensus: PBFT and LFT
The ICON blockchain uses a variation of the Practical Byzantine Fault Tolerance consensus algorithm known as Loop Fault Tolerance. The Byzantine fault occurs in blockchains where cooperation and participation is required by all network nodes but because of some ‘faulty’ incentives existing within the consensus algorithms, bad actors form, who try to exploit the network for their own selfish needs.
PBFT, in some form, is used by networks like Hyperledger, Stellar and Ripple. They essentially involve a leader node, who receives a message from the network and then based on this message, and a predetermined internal state, run a computation that tells the leader node what to make of this message. After the individual decision is determined, the ‘leader node’ shares his decision with the rest of the network, and a consensus decision is achieved based on the total decision.
This method achieves straightforward consensus however it sacrifices anonymity and decentralization in favor of a more straightforward, accountable consensus method.
ICON uses a method called ‘spinning’ that promotes faster consensus by allowing ‘trusted nodes’ to create groups among themselves. LFT can accommodate a number of different, diverse governance structures by allowing groups/nodes to set alternate voting systems depending on the nature of the transaction being verified.
Recent Price Movements
The graph shows the normalized USD price, and volume, of 5 different ICX trading pairs over the last year. ICX/BTC, ICX/USDT, ICX/KRW, ICX/ETH and ICX/BNB. The orange line represents an Index of the prices, blue is ICX/BTC, yellow is ICX/USDT, green is ICX/BNB, navy is REP/EURO and REP/USD is turquoise. The bar charts below represent total trading volume in USD. The Bithumb exchange’s volumes have been unqualified from the index.
ICX, like many other digital has battled against a repressive bear market in 2018. It launched its main network, and swapped ERC20 tokens with the networks native tokens starting from the 24th of January and tokens will be swappable till the 25th September. The switch let the ICON ecosystem run its own native Dapps, and integrate its interchain solutions with LFT consensus.
In the 6 days immediately the token swap (which stayed upon for many months after the initial launch) rose to 9.136, a 12.1% increase. Since then however, ICON has seen its value to diminish considerably and it currently trades $ 1.4219 (Index) an 84.436% dip. Over the same period BTC has fallen by 40.73%.
ICON is not dead in the water however, the Dalyi financial financial group has signed an agreement with Ripple to be a key partner with them in the Korean market. Additionally, ICON has penned a deal with major Korean bank, Woori, and it seems as though with their support, some sort of US dollar tether style product, backed by Korean Won, will be established.
Given the nature of ICON’s interchain solution, connections to other blockchains will likely be a key to their future growth. Additionally, having more blockchains for Nexus to connect with increases the liquidity options for users of ICON.
ICX is a controversial coin that has seen better days in terms of price and sentiment, falling ~84% in the current bear market.
Exponential Moving Averages (EMA) with Long Term Trends
On the 3 hour chart, the bullish EMA cross (not shown), or Golden Cross, has not occurred which confirms ICX’s negative, linear price trend (Pearson’s R Correlation between time and price is 0.824). Price has consistently trended downward, within a two standard deviation band (regression channel). At time of writing, price is near the mean and looking to retest the upper two standard deviation level. If price breaches and holds above the upper level, then that could be an inflection point for price, thus initiating a new upward trend.
If not, then a continuation of the downtrend within the regression channel is likely (extended channel section beyond current price).
Additionally, the volume flow indicator (VFI) has consistently remained beneath 0, but has recently attempted to breach above 0 and failed, which may indicate stalling buying volume (not shown). The VFI interpretation is a value above 0 is bullish and below 0 is bearish, with divergences between price and oscillator being high probability signals.
Ichimoku Clouds with Slow Wave Trend Oscillator (SWTO)
The Ichimoku Cloud uses four metrics to determine if a trend exists; the current price in relation to the Cloud, the color of the Cloud (red for bearish, green for bullish), the Tenkan (T) and Kijun (K) cross, Lagging Span (Chikou), and Senkou Span (A & B).
The status of the current Cloud metrics on the 4 hour charts with singled settings (10/30/60/30) for quicker signals is mixed; price is below the Cloud, Cloud is bearish, the TK cross is bullish, and the Lagging Span is below the Cloud and touching price.
A traditional long entry would occur with a price break above the Cloud, known as a Kumo breakout, with price holding above the Cloud. From there, the trader would use either the Tenkan, Kijun, or Senkou A as their trailing stop.
ICX is currently sitting at ~$1.45 and re-attempting a Kumo breakout. The SWTO is currently closer to overbought than oversold, which may stall price’s breakout attempt once it hits Senkou A resistance levels. Price will need to break above flat Senkou B levels between $1.52 and $1.54 for a Kumo breakout. If successful, short term price targets are $1.60, $1.70, and $1.80 (dashed lines). The support levels to watch on the downside are $1.40 and $1.30 (critical to hold).
The status of the current Cloud metrics on the daily time frame with doubled settings (20/60/120/30) for more accurate signals is bearish; price is below the Cloud, Cloud is bearish, TK cross is bearish, and the Lagging Span is below Cloud and touching price.
Again, ICX is currently sitting at ~$1.45 and re-attempting a Kumo breakout, but the current SWTO level may stall it. Price will need to break above flat Senkou B levels $1.54 for a Kumo breakout.
ICON is a digital asset that has become a hard sell in the current crypto bear marketplace. The question of whether it is facing a correction and its price will bounce back eventually, or if deeper fundamental issues will continue to drag the price of ICX downwards.
Similar blockchains like Ripple (XRP) have faced harsh criticism for the centralized nature of their consensus algorithms, and ICON likely having to deal with some of the same negative sentiment and FUD.
The network however has strong industrial connections within Korea, and its parent company, YELLO, is a well funded project. In this regard it has a strong base with to pull itself out of its current hole, and push forward if there is a reversal in the negative market sentiment.
The longer term technicals for ICX are firmly bearish, while current technicals are mixed but trending upwards. Both, the prudent short term trader (10/30/60/30 settings) and longer term trader (20/60/120/30 settings) will await a positive TK cross and Kumo breakout above ~$1.54 before entering a long position. The price targets for these traders are $1.60, $1.70, and $1.80, while the support levels are $1.40 and $1.30 (critical to hold).
Disclaimer: This analysis has been designed for informational and educational purposes only. Readers are advised to conduct their own independent research into individual assets before making a purchase decision.
About the authors
Christopher Brookins is the founder and CEO of Pugilist Ventures, a quantitative investment firm focused on digital assets and blockchain technology. Chris has a deep knowledge and unique perspective on digital assets formed by his polymath experience in equity trading, credit investing, and business development at two West Coast startups (one acquired). He has been involved in the blockchain community since 2014. Follow @chris__brookins
Aditya Das is Brave New Coin’s in-house market analyst. Raised in Dubai, UAE, he holds a post-graduate honors degree in Economics from the University of Auckland and a BA in Economics from the University of Sussex. Prior to joining BNC his most recent roles were as a researcher and Economics tutor at the University of Auckland. Follow @Quartlifecrypto