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White paper is probably one of the most common terms that crypto beginners encounter when they begin learning more about the cryptocurrency world.
It is necessary that new investors do their own research and gain a wide understanding of the use and value of cryptocurrencies. There are new crypto projects that frequently appear. Furthermore, various blockchain projects abound. These ventures leverage the promising future of blockchain technology.
Investors have to be aware and beware of whether these new concepts are legit or not.
To understand all this, you need to read the white paper.
What is a White Paper?
A white paper is a document where a start-up provides details about their crypto project. It acts as a beginner’s guide for those who want to learn about blockchain space or cryptocurrency. This report provides an outline of their project’s mission & vision, tokenomics, characteristics and organizational hierarchy.
Moreover, the paper also includes diagrams that help explain the coin or crypto token’s structure. It is also essential that the report discusses the crypto coin’s future direction.
White Paper History
Estimates show that the concept of white papers existed for more or less 100 years already. It is an innovation of the British government. They used it to inform the British public about the government agencies’ important decisions.
Furthermore, it is specifically called ‘white’ because it followed the color coding of the British government. Assigning a white color to a document means that the public can access it.
Subsequently, white papers are now part of many businesses’ marketing strategy. Many companies, including crypto start-ups, publish their papers on their websites. This publication helps them promote their ideas and grow a customer base.
Remarkable White Papers
Until now, the best example of this kind of document is Satoshi Nakamoto’s paper about Bitcoin that he published in 2008. The title of his presentation is Bitcoin: A Peer-to-Peer Electronic Cash System.
It contained this description:
“A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution.”
On the other hand, Ethereum detailed its objective as:
“The intent of Ethereum is to create an alternative protocol for building decentralized applications.”
Information that readers should look for
The reader should be aware of a paper’s components. They should always look for the following:
First, it should include details about the real-world applications that it offers to people.
Next, it should explain how the cryptocurrency functions. Do not focus on the promises. They must be able to scientifically explain how their project works. For example, their consensus mechanism.
Their tokenomics should be explicitly written. Tokenomics encompasses a lot of information about a crypto project. Hence, the white paper should clearly state this pertinent information. In this section, they should also provide details on what happens to their initial coin offering (ICO).
Additionally, there should be accurate statistics and diagrams to support their claims.
Finally, the team behind the white paper should provide their identification. Their profile can include their LinkedIn or Twitter links.
You see, the white paper isn’t just a simple document that is produced haphazardly. The way that the whitepaper explains their product or service can either drive investors towards or away from a crypto project.
CCB Blog Post: Tokenomics
Compared to other scientific papers, there is no established standard for the creation of a white paper. But, it has become an essential part when researching cryptocurrency. It provides transparency and equality to potential investors. Publishing an excellent white paper builds credibility in the crypto space.
Investors use white papers to guide them in making financial choices. On the opposite side, developers decide their participation on a certain protocol depending on what the white papers tells them.
Read a crypto project’s papers carefully because that is where you will spot the red flags about a certain crypto project.