Initially written for a now-defunct cryptocurrency media website.
Whitepapers are long, detailed documents about the cryptocurrency in question. Sometimes, it’s full of technical jargon. In some other whitepapers, it could just be the $100 work of some freelancer.
But, what makes an effective whitepaper? You can take a look at examples like the Bitcoin whitepaper, or Ethereum’s. If you’re an investor, what should you look for? If you’re in the middle of drafting your whitepaper, what points should you address beforehand?
I’m here to help you out. Here are some key points to take note of before reading a whitepaper:
Which industry are we looking at here?
A company declares an ICO. NEW COIN! MANY PLANS! WOW!
….we’ve heard it many times. Do we need another ICO though? Would it even work in the first place?
One of the indicators of this is the industry this ICO will take place in. Do you happen to know a ton about this field? It could range from the airline industry, to agriculture and the medical sector. It is highly unlikely that farmers would be interested in airline cryptocurrency coins (unless their pigs could fly). Given your knowledge of the industry, what are some of the potential applications for blockchain? Decentralised logistics? Rollback prevention? Client identification?
It’s up to you to imagine.
What is their differentiation point?
The USP. The extra ‘flavour’. The special sauce. What makes them different from other coins? A whitepaper needs to outline this. Investors go through whitepapers like toilet paper: if there’s shit, we flush.
I can easily set up an ERC-20 Token and sell it as another money-making scheme, but that doesn’t make me different from the other 200 altcoins out there. Not everything is about money after all.
What purpose does it serve? It’s a two-way process: if you had intended to invest into this new coin purely for profit, to what extent does a whitepaper’s contents affect your decision? The amount of detail a whitepaper should have, may influence this.
Is it purely a coin? Does it influence transactional power in its respective blockchain? The whitepaper must have these details outlined. If they leave it out, or worse, missing, why invest when there’s better ones?
You need difference. Differences help you stand out from the crowd. The whitepaper is where you show that.
What is their Roadmap?
There might be a long-term plan outlined in the whitepaper. This is good. How long is it?
6 months? 1 year? 2 years?
If there is an upcoming token sale, what are the stages? What percentage of overall coins will be distributed for sale? How much will be shared amongst the team itself?
The roadmap (or lack of) gives you a good indicator of where your investment will be going over a long period of time. You can expect new features, major changes, etc. which could be turning points for your investment goals. Some examples of investment goals could be reverting back to fiat currency after a certain coin price, or capitalizing on the incentivized rewards the company will distribute amongst investors.
Which reminds me, are there rewards? I love rewards. Don’t you?
Who is in their Team?
LinkedIn is perfect for this. It’s becoming increasingly difficult in the contemporary working world to trust someone without a proper LinkedIn profile. Having an online presence is key to showing your brand: in this case, how legitimate your team members are.
There are a few cases of fake profiles set up to fill C-Pos spots on an ICO team. We don’t want that. During your due diligence, do a thorough check on all the members. Are they the best in their field? Where did they gain experience from? Who do they know? What is their level of presence in your region?
A company doing an ICO in one country on the other side of the world from you, may not be so relevant to what you want. Unless, of course, their price is predicted to be very liquid, and in your favour. That might be up your alley.
Know this: the whitepaper outlines every single member of the team involved behind the ICO. Investors will do background checks for members – they would be encouraged to see the team advised by major Bitcoin or Ethereum influencers. Roger Ver, or Vitalik Buterin, for example.
If your whitepaper is effective, your readers would have their expectations met. This can come in many forms.
Those whom are interested in contributing to your cause will study your whitepaper extensively. Having a well-written document creates accountability, and adds legitimacy to your ICO. Some investors have technical backgrounds, and they’d want to understand the finer details in your blockchain system. In that case, having a technical version of the whitepaper would be very helpful.
The whitepaper also serves as an official ‘FAQ’: if they have any questions, consult the whitepaper. For some interested persons, they perceive the whitepaper as final and absolute. You can find long-term plans, key objectives to meet, etc. written in there, and with these come possible answers. This depends on their investing habits, of course.
It also adds a sense of professionalism: how many ICOs have you seen pop up everywhere on your news feed? 1? 2? 20? Some ICOs are just mere marketing gimmicks, and the common occurrence of these ‘shitcoins’ can confuse the average individual. With a proper whitepaper, you can reinforce your professional place in the crypto world. You don’t want people to think you’re a scam, right?
Upcoming blockchain companies, take note. These are the kinds of things investors are looking for in a proper whitepaper. If they don’t see these, they get scared and look the other way. If you want to start drafting out yours, make sure to keep these points in mind!
What else should we look at? What’s your experience with low-quality/high-quality whitepapers? Comment below, I’d love to hear what you have to say!