The origin of this word is not entirely clear. Some authorities state that it is derived from the Greek δείκανον, deikanon, which refers to a picture, especially an embroidered one. Others think that it is related to the word εἰκών, eikon, which means statue or picture, with the added Hebrew or Greek prefix d or diyu.
In his Hebrew commentary (Hullin, p. 389), he makes a similar statement, quoting both theories and noting that the second one is an explanation of the Geonim, who claim that the prefix means "two", and therefore the word means a duplicate of an image.
Let's expand on both possibilities.
The first theory says it derives from the Greek deikanon. That word is cognate with the verb deiknynai meaning "to show." There are a number of English words that ultimately come from that root, including these two:
- paradigm: "an example, a model," from Late Latin paradigma "pattern, example," especially in grammar, from Greek paradeigma "pattern, model; precedent, example," from paradeiknynai "exhibit, represent," literally "show side by side," from para- "beside" + deiknynai "to show"
- policy: ["written insurance agreement"], 1560s, "written contract to pay a certain sum on certain contingencies," from French police "contract, bill of lading" (late 14c.), from Italian polizza "written evidence of a transaction, note, bill, ticket, lottery ticket," from Old Italian poliza, which, according to OED, is from Medieval Latin apodissa "receipt for money," from Greek apodexis "proof, declaration," from apo- "off" + deiknynai "to show"
Surely connected with Gk. eikon (= likeness; see אִיקוֹנִין), but the ד is of uncertain origin. According to some scholars דְּיוֹקָן is the contraction of דְּיוֹ (= Gk. dyo, ‘two’), and eikon, and properly means ‘a double image’.
The Greek eikon gives us the English "icon" as well:
"image, figure, picture," also "statue," from Late Latin icon, from Greek eikon "likeness, image, portrait; image in a mirror; a semblance, phantom image;" in philosophy, "an image in the mind," related to eikenai "be like, look like," which is of uncertain origin.
Both explanations seem reasonable to me. I'll leave it to you to consider which you consider either a paradigmatic example of a good etymology or an iconic one.