What is a Whitepaper?
Every crypto project publishes a white paper, where they provide a lot of information about the project. Such a document can be quite scary for a beginner in the crypto world because it is not exactly a small document. In this article, we will explain to you what a white paper is exactly and what you should pay attention to when reading a white paper.
What is a whitepaper?
A white paper is not only used within the crypto world. In almost every market, a white paper is used. A white paper is an expository and argumentative document in which a company explains more about itself and its product or service.
With such a document, companies hope to convince consumers that their product/service will solve a problem. They do this by first describing the problem, then going into more detail about the solution they offer.
Often the white paper also contains the company's vision and mission. Thus, you could say that a white paper is a document that contains all the available information about a company.
White papers within the crypto world
If you are reading this article, you probably want to know more about the white paper used for crypto and blockchain projects. A white paper, then is basically the same as described above. This document provides almost all existing information about a crypto or blockchain project.
Such a white paper is, in most cases, issued before the project goes live. This means that you can read a white paper even before the Initial Coin Offering (ICO) takes place. This is necessary because organizations want to use it to get potential buyers excited about participating in the ICO.
By the way, a white paper is not only useful before the launch of a cryptocurrency. You can consult a white paper at any time to gather more information about a project before investing in it. A white paper is also updated regularly. Therefore, it is not unwise to re-read a white paper from time to time.
The usefulness of a white paper
With a white paper companies want to convince you to invest in the project. They do this by explaining what the problem is, what solution they offer for it and why this solution is the best.
You can use a white paper to find out if a project is worth investing in. Many crypto traders read the white paper of a project first before they decide to join the ICO or buy crypto coins. This is part of a fundamental analysis you can perform.
What does a white paper look like?
Every white paper looks different. It‘s not the case that you will always find the same information in each white paper. Some white papers consist of a few pages, while other white papers can be seen as a whole book. Therefore, it is important to decide for yourself what information you will get out of a white paper.
Some white papers will go deep into the technology, while other white papers will just explain how they solve a problem, without telling you what that will look like technically.
It is not necessarily the case that a cryptocurrency with a great white paper is more likely to succeed than a cryptocurrency without a white paper. Therefore, look carefully at the quality of the content and not necessarily the quantity.
Where can I find the white paper of a cryptocurrency?
Almost every cryptocurrency has a white paper. This white paper can be published in different ways. In most cases, you will find the white paper on the website of a cryptocurrency. You can then often download the document in PDF form.
However, it is also possible that you first have to leave your personal data to receive the white paper. In this way, an organization can provide you with updates regarding a project. Be careful which data you share with others, and never send a wallet address or private key. These are not needed by third parties to send you a white paper.
Bitcoin white paper by Satoshi Nakamoto
Not all white papers are as well-known as other white papers. The most famous white paper is that of Bitcoin (BTC)
, which was written by Satoshi Nakamoto. This paper consists of 9 pages and can be read at bitcoin.org.
What is so special about this document? This white paper describes the workings of cryptocurrencies for the first time. Consider the blockchain technology, the Proof of Work (PoW)
consensus algorithm and the mining principle. Before Bitcoin existed, it was not used in this way.
This white paper also describes possible future problems and what the solution should be. With Bitcoin, there was an additional reason behind this. This is because the actual creator of Bitcoin never revealed himself and hides under the name Satoshi Nakamoto.
Thus, the inventor would never be able to make modifications to the blockchain later, because he would be recognized. He therefore decided to lay down in a white paper how the blockchain should work when certain incidents occurred. Since blockhains are open-source, other developers can make these modifications to the code.
What should you pay attention to when reading a white paper?
It is important to note that a white paper does not say everything about a cryptocurrency or blockchain. This is because anyone can make big promises in a white paper, without anyone also being obliged to keep these promises. There are, therefore enough cases of scams where a lot was promised in a white paper, but none of this was delivered.
Therefore, do not only research based on the white paper, but also look at information you can find on other sites. There is often a lot of information to be found on the website of a crypto project, and you can check the members of the team on various other websites.
The latter is always smart to do when researching a cryptocurrency, by the way. When a team has a lot of experience and has already worked on large projects and companies, this increases the confidence crypto traders have in cryptocurrency.
To sum it up: a white paper is an expository and argumentative document in which a company explains more about their solution to an existing problem. Almost every crypto project releases a white paper before they go live. This way the public can already get acquainted with the project, so they can later join an ICO, or buy tokens once the project goes live for the public.
White papers always differ in content and structure. One white paper will go into more detail about the technical workings, while another will superficially describe the problems they want to address.
It is important not to rely solely on the information given in a white paper. Anyone can write a white paper, and promises do not have to be kept legally. Therefore, always do your own research on a cryptocurrency before you decide to invest in it.