If you’re in the space of cryptocurrencies, either as investor or business person, the one thing that you can’t ignore are whitepapers. Each week, there is a new technology or crypto whitepaper that spells out new technologies that will change the industry. Also, many of the major projects in the industry, such as Ethereum or Monero, started with industry whitepapers.
Because of this, white papers are now a key part of establishing new blockchain projects and cryptocurrencies. Everyone from developers to businessmen now demand a document that describes what the problem is and how it plans to solve it.
The popularity of whitepapers means that it has become an important task for anyone getting involved in the space of crypto. As most people in the industry understand already, there are a huge number of scams in this new space of technology. Also, many projects may seem appealing on the surface, using the right buzzwords and terminologies, yet they’re not backed by anything, and quickly disappear without warning.
Due to the transient nature of companies that publish white papers, we’ve put together a quick guide on how you can choose the best whitepaper with a solid idea and technical details to actually make the idea a reality.
Word Of Warning
It’s common for blogs in the cryptocurrency market to state that they do not offer investment advice, but you should take caution extra seriously. This article is simply a guide that beginners can use to analyse a whitepaper from an investor’s point of view, and if they are interested. Interested could mean a lot of things such as contributing to the project itself or lending a hand with marketing or simply participating in the community. All of this is fair and valid.
The point is that this guide is for educational use only and should only be used as a reference for people who’d like to enter the space of cryptocurrencies, and is not investment advice.
Getting Started With Whitepapers
First, let’s begin by defining what whitepapers are and their potential use for describing a product or service. Although most investors in the blockchain think exclusively of cryptocurrency whitepapers, they have a longstanding reputation in the fields of business and technology.
Also, whitepapers are not just limited to illustrating their technical use, and there are no rules or guidelines for what enables a white paper. Anyone can publish a whitepaper today, with minimal costs and expense. The bottom line is that whitepapers are now more of a marketing tool than anything. Companies who want to position themselves as leaders in a specific industry or domain publish them in hopes that their popularity will catch on and spread to new customers and other influencers.
Some companies hope that even their competitors will reference their research, although there is no establish peer review process for fact checking their claims, nor are there any limitations for their scope or application. So, instead of whitepapers, think of them as simply a report of what the product or service does; white paper is simply an official-sounding name with little credibility to back it up.
The name whitepaper was traditionally used by researchers and accredited financial institutions for publishing verified data and research, today that is no longer the case. Just because whitepaper sounds official does not mean it is any better than any other piece of content written by a marketer. So you should not always believe what you see or read and keep a healthy dose of skepticism.
However, this is not saying that all white papers are nothing more than a slick marketing ploy. For example, Satoshi Nakamoto’s original thesis on bitcoin came from a white paper. It’s likely that the next disruptive blockchain tech will have a whitepaper too when it becomes a working product. But there’s just as many scam coins and deceptive projects leveraging the authority of whitepapers too, so be careful.
In order to get a feel of a project’s legitimacy or otherwise, you should ask yourself the following questions.
What Is The Project?
This question should be the easiest to answer, but it’s likely that you’ll find white papers that are either poorly written or misleading. Marketers seem to have a love affair with buzzwords, jargon, and fictitious names that you’ll find in white papers, which makes them difficult to understand.
So, if you’re not sure what the project even does or the problems it intends to solve, they are two likely explanations for this. The project is either too advanced for your knowledge, so it might be wise to read up on the industry before investing, or the project is simply a scam and out to take people’s money.
In either of the above cases it would be unwise to put money into the project. Regardless of what marketers or other investors think when you read through the opinions posted on Twitter, Reddit or forums. To put it simply, if you don’t understand what the project even does, then don’t put your money into it.
How Does The Project Work?
After you find out what the project is and what it hopes to achieve, then the next question to ask yourself is: “How?”
Because a good project will outline how the technology functions, and the best whitepapers will break down how it works with no buzzwords or marketing jargon. This is where the
A good cryptocurrency white paper should explain how the technology will work, and the best white papers do so with varying levels of complexity and technical knowledge required. This is where the original Bitcoin white paper really shines. It is among the most readable and understandable blockchain white papers ever written.
It’s also not very long, in contrast to many modern white papers. If you’ve never read it, the Bitcoin white paper is a good place to start. It will give you a good baseline for what a great cryptocurrency white paper looks like.
By the end of going through the whitepaper, if you can’t decide what problem that the project solves and how it goes about doing this, then the whitepaper probably did a bad job in explaining it. Another way of looking at it is that the most well put together whitepapers are a sign of a great project, while the reverse is also true.
Why Does The World Need This Project?
We could make a blockchain project about anything, like fire protection for when you’re underwater – but does the world truly need this?
To any thinking person, the answer would be a resounding no. But this does raise an interesting question. This means that it’s important for you to look at how the project will be viewed in the real world of commerce. Who is going to use this product, and what advantages does it have over its key competitors? If the whitepaper clearly defines and positions the product as an ideal solution, then you could be onto something great.
But before you go ahead and put all your eggs into one basket, it’s important that you do your due diligence to see if someone else is working on the same thing,, and if that project is doing it better than what’s already out there.
Why Is This Project Using The Blockchain?
Despite popular belief, not every project needs to use a blockchain to be successful.
While the blockchain and the internet itself is a great tool, the majority of the ICOs that we’re seeing could simply be web applications. Also, most businesses that are trying to build on the blockchain trend get a reduced access to capital expenditure.
However, there is actually nothing wrong with starting a company using the ICO fundraising model. But too many startups try to short their company as a method of blockchain tech when there’s no clear use case.
How To Read Crypto Whitepapers Conclusion
The bottom line is that going through a crypto whitepaper is about knowing what to look out for and going with your intuition. While some papers are from businesses that haven’t even touched the ground yet, so there can be a few unknown variables. But if you do decide to invest money into something, remember to do your due diligence and don’t put more money into it than you can afford to lose.