How to read a whitepaper
When the time comes to evaluate the potential of a crypto project, especially if it is an ICO (Initial coin offering), the first step to take is always to analyze the white paper of the project.
The purpose of a white paper in the crypto industry is to explain in detail the goals of the project. This includes the description of the product and its technology, the problem that will be solved using this product, details about the currency that will be created, as well as information about the founding team and the timeline of the project.
The most famous of all the white papers in the cryptosphere is the one on Bitcoin titled “Bitcoin: A Peer-to-Peer Electronic Cash System,” which was published in 2008 by Satoshi Nakamoto, the mysterious inventor of Bitcoin, and which led to the creation of the first decentralized digital currency.
In this guide, you will learn how to read a white paper in order to have all the tools in hand to properly analyze your next investment in an ICO or a cryptocurrency.
Why read the white paper?
The three main reasons for reading a white paper related to a cryptocurrency are:
1. To understand the project
2. To determine if the targeted problem can indeed be solved with the blockchain solution that is proposed
3. Ro define if this virtual currency project makes sense as an investment. The information in a white paper should answer these three key questions.
What to expect in a white paper
Summary
The summary of a white paper serves to give you an overview of the project and to encourage you to read the entire white paper to learn more about the project and its cryptocurrency.
Introduction
The introduction often recalls basic concepts, such as the blockchain and the profitability of cryptocurrencies, in addition to giving information on the market in which this particular blockchain plans to enter.
Problem definition
The problem definition goes a little deeper into the detail of the challenges of the industry concerned and presents the most important points concerning the solutions that will be brought to bear on them. The challenges can be technological in nature or related to the business world. They may also include solutions that already exist but are not sufficient to address the entire problem.
The product description
Next you will find a description of the product the project is about, which will detail what the platform, product or service does, how it works, and why it constitutes an excellent solution to the problem targeted by the document.
Technical details
This will be followed by the technical details of the blockchain project, an in-depth technical explanation describing how the product is developed, what technical specifications it has, and how the accompanying digital currency will come into play.
Digital Currency
This section will go into more depth on how the new currency will work, what kind of cryptocurrency reserve management will be in place, and how it will benefit users of the new platform and/or or the crypto community as a whole.
Details of the Sale
If the white paper was published in part in anticipation of the creation of a cryptocurrency, then you will find the details of this funding. This will include all the milestone dates of the sale, the deadlines for obtaining bonuses, details about the investors authorized to or not to participate, the purposes for which the accumulated funds will be used, the timeline of the project, etc.
Presentation of the team
Towards the end of the white paper, you will usually find an introduction to the founding members and the main developers of the project. This part is important because a team with a solid background is an integral part of the key to success for a crypto project. Thus, you will find detailed in this section the professional experiences of each member of the team and the description of the role they will play.
Conclusion
Finally, the whitepaper will end with a conclusion, summarizing the key elements of the project, and generally inviting you to take part in the fundraising campaign in the event of an upcoming ICO.
Filter important information
If you are considering investing in several new projects and want to get a general impression of a case before analyzing it in more depth, filter the white paper to find answers to the most important questions you should ask yourself. before investing in a crypto project.
These questions include:
1. Is the project legitimate?
2. Does the team have the necessary experience to carry it out?
3. Is there a real market for the product or service offered?
4. Who are the competitors?
5. What will be the function of cryptocurrency?
6. Could a virtual currency that already exists replace this new crypto? Etc.
Do Thorough Research
Although a white paper covers most aspects of a crypto project, if you are planning to make a sizable investment in such a project, your research should not stop there.
Platforms such as Reddit or Twitter may provide insight into the opinions of crypto community insiders, and independent ICO reviews may also provide useful insights.
Finally, asking questions directly to team members on their Telegram or Slack channels should also be part of any background assessment on a blockchain project before buying the cryptocurrency.
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