HOW TO UNDERSTAND ANY CRYPTO PROJECT WHITEPAPER
Amongst the things to do during your fundamental analysis is to read a project white paper however, a lot of people still have difficulty understanding what a whitepaper is, the need for it, and even how to read and understand it. While some others think that one must possess computer science skills to be able to understand a project’s white. So in this article, I’m going to be explaining the what, why, and how to read and understand a white paper. So, if you are a blockchain investor, trader, or even a crypto enthusiast who wishes to know the nooks and cranes of any project, then this article is for you. But before we proceed, let us give a little history and evolution of whitepapers.
BRIEF HISTORY OF WHITEPAPERS
The origin of whitepapers was dated back to the early 20th century when it first appeared in the churchill whitepaper of 1922 in the British government. Gertrude Bell, who was a British explorer and diplomat, was the very first woman to write a 149-page white paper titled “Review of the Civil Administration of Mesopotamia” and was presented to Parliament in 1920. Learn more here
Over the years, the use of whitepapers evolved into business ventures and it became an epignosis for sales conversion. So then, what exactly is a Whitepaper?
WHAT IS A WHITEPAPER?
A whitepaper is an authoritative document that provides detailed information about the existence of a project. It explains the overall concept of a project, ranging from the purpose of the project, the problem it aims to solve, why they want to solve it, and how they plan to solve it and still remain relevant in the long run.
It is an effective marketing or sale tool because it portrays the full image of the project and indirectly compels an investor or individual to partner or invest in the project. Little wonder why project owners and developers request that you check out their whitepaper? You guessed right. This is also why copywriting skill is a prerequisite for writing a white paper.
In cryptocurrency, the very first crypto whitepaper, a nine paged document, was created by Satoshi Nakamoto in the year 2008. This whitepaper introduced the emergence of bitcoin, a peer-to-peer electronic cash system, which is today the father of all cryptocurrencies. We shall talk about the bitcoin whitepaper in another article but for now, let us consider the reason why a whitepaper is necessary.
WHY A WHITEPAPER IS NECESSARY
To begin with, It is no doubt that Whitepaper influences an investor’s decision-making, especially after analyzing the project’s potential to survive in the future. This can be evident during a project’s presale, when there may not have been any success story for the project, investors depend on the whitepaper content for their investment option even though they may not be aware of the problem being solved.
Furthermore, It can also be used to evaluate the legitimacy of a project or different projects and carve out the one with the best profits and growth strategy. Whitepapers make projects trustworthy because it bridges the gap between a project’s success story, datasheet, and even case study.
HOW TO UNDERSTAND A PROJECT’S WHITE PAPER
It is always advised to understand a project before investing in it and reading a project’s whitepaper is one of the best ways to understand any crypto project. Although some people still find it difficult to understand due to the ambiguous terms used in the whitepaper explanation but not to worry as I will be giving you a step-by-step guide on what you should look out for in other to better understand any crypto project.
To begin with, there are so many ways to read and understand a crypto project white paper but I will be listing just a few thus:
- Understanding certain crypto and blockchain terminologies: One should always be on the lookout to understand some of these terms as this will help to scale you through your blockchain journey. Terms like Consensus mechanism, roadmap, tokenomics, etc are a must-learn for anyone who intends to be a successful investor. No need to stress yourself because I already have an all-in-one article where you can learn these terms. Check it out here
- Identify the reason for the project: That is the why or motivation behind the project. It explains the problem the project is trying to solve, how it tends to solve it and how it is different from any other similar solution that may already be in existence. These are always found towards the beginning of the whitepaper.
- Identify if the project has a real-world utility: By utility I mean if the project has any other function aside from just being a coin. Identify if it will be a governance token or even has an NFT that may give rights to products.
- Identify the consensus mechanism of the project: The consensus mechanism is the foundation of decentralized technology as it determines how a transaction is validated without contacting the parties involved. Also, there are different types of consensus mechanisms ranging from proof of work, proof of stake, proof of history, etc.
- Look out for graphs, charts, and diagrams: these may be used for explaining the project as they contain some valuable information and numbers that explain distributions and some other technical details.
- Check out the project’s timeline: A well-detailed timeline includes details like when it will be launched when sales will start if there will be an ICO, IDO, etc and this goes a long way to show the competence of project developers.
- Learn about the project’s tokenomics: This will help you to know the best time to enter a project or if a project is even worth it.
- Also, do not hesitate to find out if the project has any initial token distribution
- And lastly, always ensure to be on the lookout for the team behind the project, because, their background experience says a lot about their competence.
Every potential crypto project employs the use of a white paper, and how detailed and well simplified it is, determines how effective a marketing tool it can be. I hope you now understand what a whitepaper is and how to effectively read and understand a whitepaper?
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ABOUT THE AUTHOR
Igwe Ihuoma Patience is a self-taught creative and industry-specific content writer, and cryptocurrency enthusiast with 2years plus experience and knowledge of the constantly evolving blockchain space.
I am skilled in content creation, copywriting, curating captions, video editing & graphic designing with mobile phones and I teach others how to get started in the cryptocurrency and blockchain space and My goal is to make blockchain learning and updates easy for anyone to understand.
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