ELI5: What is the function of the ICP utility token?

The ICP token is used in a variety ways.

Computation and Storage

The first use ICP is used to pay for computation in the form of cycles. 1 SDR of ICP can be converted to a trillion cycles. SDR is a stable basket of currencies tracked by the IMF. Its price sits around $1.42 USD at the time of writing. Cycles are burned to pay for computation, storage, and serving of web pages. As more dapps are hosted on the Internet Computer blockchain, more ICP tokens are converted and burned.

Governance of the Internet Computer

The second use of ICP is in the NNS. If you want to vote and earn voting rewards in the NNS, you have to stake your ICP tokens in a neuron. When you vote, you receive voting rewards in the form of newly minted ICP tokens.

Rewards to node owners

Lastly, ICP tokens are also minted as rewards to node owners. On the one hand, the total supply of ICP is deflationary because the tokens are converted into cycles and burned. On the other hand, it is inflationary because rewards are minted for node owners and neurons.