If you have any interest in participating in the blockchain space, you need to know everything you can about whitepapers. A whitepaper has become one of the most important steps in the creation and launch of any new token or coin.
As a result, the whitepaper is critical for both developers and potential buyers. On the one hand, if you’re involved with building a new cryptocurrency, having a killer whitepaper will set you up for an explosive launch. On the other hand, if you want to buy, trade, or otherwise invest in a new currency, being able to read and understand a whitepaper will help you make wise purchasing decisions.
This guide will cover everything you need to know about cryptocurrency whitepapers.
Crypto Whitepaper 101: An Introduction
Put simply, a whitepaper announces to the world the creation of a new cryptocurrency. Essentially, it defines what the currency is, how it will work, what problems it aims to solve, and how it will benefit people who purchase it.
In general, a company will publish a whitepaper before launching a new token or coin. In fact, issuing a whitepaper prior to launch has become an unwritten rule in the crypto world. Whitepapers are typically published as part of an ICO.
It’s a huge red flag if somebody tries to launch a token or coin without first releasing a whitepaper. Savvy investors would not buy this currency. And this means that the people creating it would never get it off the ground.
For all these reasons, it’s absolutely essential that any new cryptocurrency has its own whitepaper. In terms of a currency’s ability to enter the crypto market, this is the first main bridge to cross.
The Anatomy of a Cryptocurrency Whitepaper
While there are no set rules for the structure of a crypto whitepaper, there are some key elements that should be present. This all goes back to the first crypto whitepaper: Bitcoin (BTC).
These include:
- Introduction. This section sets the stage. It introduces readers to the new cryptocurrency. In general, a good intro will highlight the most innovative, exciting, or impressive aspects of the currency.
- How it Works. There must be a section explaining how exactly the currency works. This will generally be somewhat technical, but the best whitepapers can still be understood by folks who aren’t experts.
- Problem. A new crypto should be aiming to solve some specific problem. A good whitepaper should clearly define that problem for readers. Doing so will help establish the idea that the new currency has real-world use value.
- Solution to the Problem. Immediately after defining the problem, a whitepaper should explain how the new cryptocurrency will solve the problem. Again, the best documents will be clear, direct, and easy to understand.
- Real-World Uses and Applications. There should also be a section of the paper that outlines some of the real-world uses and applications of the currency. This could include facilitating financial transactions or product purchases. It could also include something having to do with investments, or with advancing blockchain technology for some other purpose. One way or another, a whitepaper needs to demonstrate that there is an actual need—and a real-world application—for the new currency.
- Conclusion. The document should end with some form of conclusion. In general, this is the writer’s chance to drive home the most important concepts having to do with the new cryptocurrency.
How to Write a Crypto Whitepaper
If you’re coming at this from the developer‘s side of things, you need to know how to write a compelling whitepaper.
Ultimately, you want to give readers all the most relevant information about your new cryptocurrency. But you don’t just want to spit at them with no rhyme or reason. You need to package all this factual information in such a way that it will persuade your readers to want to buy into your token or coin.
With that in mind, a great whitepaper takes skill and planning. You need to gather the right kind of data. And you need to present it the right way. You can’t be misleading or dishonest, but you must be very intentional about how you present your information.
As a starting place, put yourself in your readers’ shoes.
- What would a person interested in purchasing, trading, “hodling,” or otherwise investing in crypto want to hear?
- What excites a potential investor?
- How does your currency meet those needs and desires?
Additionally, pay careful attention to the way you sequence your information. Even when you’re sharing data, you’re still telling a story.
- How will you frame this data?
- What problems and solutions will you highlight?
- How will you turn it into a compelling narrative that will leave readers fully believing in the power of your cryptocurrency?
In terms of style, shoot for something formal but not overly technical. Your whitepaper should be easily understood by a smart reader, but don’t bank on them being crypto experts.
How to Read a Cryptocurrency Whitepaper
When you’re reading a crypto whitepaper, whether it’s Satoshi Nakamoto‘s original Bitcoin whitepaper or one for a new stablecoin, you need to understand a few things.
For starters, you should know that whoever wrote it is ultimately trying to sell you on something. This could be a concept, like decentralization, or something you actually invest in like an ICO.
Obviously, if you come across anything that is flat-out wrong, made up, or dishonest, move on. It’s not worth reading or investing.
But even when a whitepaper presents accurate information, try to look beyond the narrative it’s trying to tell you and dig deeper. Try to objectively analyze the viability of the new token or coin.
In particular, pay attention to the problem and solution sections.
- Do these seem legitimate and valid?
- Is this a real problem?
- Does the explanation given in the whitepaper seem like it will actually solve the problem?
Similarly, pay attention to the explanation of real-world uses and applications.
- Do they make sense?
- Is the new currency actually moving into fertile terrain or is it simply repeating what’s already out there?
Of course, do research as needed. A good whitepaper shouldn’t be so complex or so convoluted it becomes impossible to understand. But at the same time, the document should demonstrate a good grasp of the technology is explained. So, if you need to do a bit more research to understand some of the technical ins and outs, then do it. Make sure everything matches up and makes sense.
You have to use your critical thinking skills. Understanding that the whitepaper is essentially there to persuade you to buy, do what you need to see through the surface and make a smart, informed decision.
