Cycles overview
What are ICP cycles?
The Internet Computer Protocol runs on a network of nodes owned and operated by a growing community of independent node providers (NPs) distributed across the globe. NPs spend money for running nodes, such that they purchase hardware and require electricity and network bandwidth. The Internet Computer Protocol compensates NPs on a monthly basis by minting and distributing rewards in the form of ICP tokens.
To make ICP sustainable, canisters are required to pay for the resources they consume, including storage and compute. Resource consumption is not paid in ICP tokens but cycles. It’s typically the canister’s developer who tops up the canister with cycles. As the canister is used, its cycles balance is continuously reduced. Eventually, the canister needs to be “topped up” with more cycles. The default way to get cycles is to convert ICP tokens to cycles. When doing so, the protocol burns the ICP tokens.
Why are cycles different from ICP tokens?
While the value of an ICP token is volatile, cycles are not. They are pegged to XDR, a group of fiat currencies. This has the benefit that resource consumption and smart contract execution on ICP has a somewhat stable price.
Cycles are measured in very large numbers, such as billions and trillions. When you talk about cycle transfers and replenishment, you will usually operate with trillions of cycles.