White papers are documents that describe a specific use case for a product, service, or product. White papers are not just for blockchain investors. They have a long history in technology, business, and general.
They can be used for technical purposes, but there are no rules about what constitutes white papers. Anybody can publish one. They are essentially marketing tools that explain a problem or a solution. White papers are used by smart companies to make themselves known as experts in a particular field. This is in the hope that other companies in the same industry will refer to their research. However, there is no peer review or limitation. You can think of white papers as reports or ideas.
White papers have a reputation for being technical experts. However, I’m sure you now realize this might not be true. It’s not a white paper, but it doesn’t make it any different than any other marketing document. It would be wise not to believe everything you read, and to constantly question any white papers you find.
Why read a whitepaper?
Most people read cryptocurrency whitepapers these days to determine whether they want to invest in the Initial Coin Offering (ICO). However, there are many other reasons to sit down and take a look at the benefits of a new project. Perhaps you are just curious about the project and want to know more. Perhaps you are interested in investing after the ICO is over. You might want to contribute to open-source code or get hired by this team. No matter what reason, the whitepaper is a good place to start. It contains all the necessary information for investors, business people, and developers to get interested in the idea.
How to Read a Crypto White Paper?
What are the essential elements of a white paper? The white paper should at a minimum cover these topics:
What is the purpose of the project?
This is easy you can read the whitepaper to find out the exact purpose or function of the project. What is the technology doing? Is it creating a new cryptocurrency or not? Is it a decentralized travel agency or a cryptocurrency? Is it a platform that allows buyers and sellers to exchange real estate? If you don’t know what the project is, likely, the white paper or idea isn’t fully developed.
What is the purpose of this project?
The white paper must address the second element, which is WHY the project was developed. What difficult does the project shot to solve? What is the problem’s scope? Who is it affecting?
For example, the WaBi whitepaper does a fantastic job of addressing what problem it is trying to solve. It is trying to stop counterfeiting in China which “claims thousands and costs billions of dollars”
How will these issues be solved?
This is where things can get complicated for many people. While you understand the problem and how it should be solved. You get lost in the HOW. Even those without technical backgrounds, this happens to all of us. If you have to, go through the white paper and then search for additional resources such as videos and articles that will help you understand the technology and its limitations.
You should be able to comprehend the technical aspects of the project. Is it necessary to incorporate a blockchain in the project? It is worth the effort to create a decentralized blockchain when a small web app with a central database can do. Is decentralization beneficial for the project’s ultimate purpose? This is food for thought.
Who is on the Team?
A creative and vibrant team is vital. A great team can make a bad idea great. This is called pivoting. A weak team can make a great idea go stale. Research your team members. Use LinkedIn to look up their names and Google them individually. It would surprise you at how many scams projects pull together with their team members. You should look for stars and nothing less.
When will Milestones be completed?
A white paper without a roadmap is a bad sign. The white paper should at a minimum include information about the project’s progress. If there isn’t, you are reading about an idea, not a business.
A solid roadmap will contain milestones for the next 12-18 months. The exchange launch, test-net launch, and main-net launch are all examples of milestones. Be critical about the milestones. Are they realistic? Are they too short or too long? Are they too long or short?
What are Tokenomics? How will funds be used?
To conclude, if you are reading a whitepaper about a future ICO you will need to evaluate the “tokenomics” of the project. This is the economics that relates to how tokens will create, what price they will be at, and how they will be used.
You should now be able to identify red flags in white papers. You will also need to spot spelling and grammar mistakes in white papers. These details can indicate that the project is not able to do quality work. Also, make sure to check the whitepaper for plagiarism. This indicates that there is a high chance of a scam.