Cryptocurrency whitepapers are detailed documents that outline the project's intentions, products, and infrastructure. While there isn't a rule on what needs to be included, most projects aim to share as much information about how the project aims to succeed in the hopes of building investors' trust, and interest.
Some of the topics typically covered include a summary of the project's team, goals, products, features, and tokenomics. When researching a blockchain or cryptocurrency project, whitepapers are a very good place to start.
What is a whitepaper?
A typical cryptocurrency whitepaper is usually a report or guide that teaches its readers about a certain topic or problem. As an example, developers might make a whitepaper covering their software to inform users about what they are constructing and why.
In the crypto space, a whitepaper is released by a project and assists in outlining the technical guidelines and core features of the project. While many whitepapers focus on specific coins or tokens, they can also be concentrated around various types of projects, like decentralized finance (DeFi) platforms, for example.
Cryptocurrency whitepapers will typically consist of statistics and diagrams outlining the project's core date, as well as the governing structure of the project, the team involved in creating and leading it, and their roadmap (current and future development plans).
What value do crypto project whitepapers serve?
Despite not being worth a monetary value, whitepapers play an important role in the crypto space. While there are no official criteria for creating them, whitepapers are integral to investors, researchers, developers, and industry insiders.
A great place to start for anyone interested in a project is to read through the whitepaper. If you're considering investing, it's best to meticulously read through it again. Whitepapers often provide insights into the project's potential red flags and a means to monitor whether they are sticking to their forecasted timeline.
A number of blockchain projects that have crashed displayed subtle warning signs in their whitepaper, like promising a deliverable without providing any evidence on how it will be executed.
How does one make a cryptocurrency whitepaper?
There are no official rules or outlines that projects need to follow when creating a crypto whitepaper, each blockchain project may determine what is best for that individual situation. As mentioned earlier, these are often the first official documents outlining the project to potential investors, so thorough and informative content depicting the project's structure, goals, and roadmap is best included.
Whitepapers should always be neutral, and avoid persuasive language or making too many promises. This is essentially a "business plan" in the crypto sense released to investors or the public prior to launching.
What info is included whitepaper?
Whitepapers are created by founders to provide a comprehensive overview of both the project and the goal. For instance, Bitcoin's whitepaper describes the project's core objective as "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."
While Ethereum's whitepaper describes its intention as "The intent of Ethereum is to create an alternative protocol for building decentralized applications."
In a good cryptocurrency whitepaper, the project will outline what specific problem it aims to solve, and how it will improve various aspects of people's lives. Be cautious of projects that promise the world but have little in the way of evidence to back these claims. In the ICO boom of 2017, thousands of projects overpromised and underdelivered (if they delivered at all).
Whitepapers will typically include how the cryptocurrency will work and function in the greater crypto ecosystem. This might outline technical aspects like the consensus mechanism the blockchain will utilize and how the decentralized aspect of the network will function.
Another core piece of information that should be included in a project's whitepaper is the tokenomics. This will include information on the token, how it will be allocated, whether will it participate in token burns, or any incentive mechanisms.
Roadmaps (a project timeline)are not just useful to see how a project aims to deliver on its objectives, but also provide insights into whether the project can keep up with its promises. While missing a deadline isn't a deal breaker in the crypto space, being open and communicating why is important.
A well-articulated whitepaper will typically be written in a manner that anyone can understand them. However, its important for the new blockchain project to also include certain technical specifications to provide evidence of the project's competence. Anyone can write a whitepaper, it takes technical know-how to create a blockchain platform.
Tips for reading a cryptocurrency whitepaper
- first and foremost, ALWAYS read a project's whitepaper before investing
- read whitepapers with a pinch of salt, they must be neutral and not over-promise
- Look into the team members and their experience in the crypto and blockchain realm
- a great idea doesn't necessarily mean it will be used or adopted
- look for technical explanations that showcase the project's understanding
Examples of crypto projects’ whitepapers
The Bitcoin whitepaper (2008)
The instigator of the entire cryptocurrency industry, Satoshi Nakamoto, an anonymous individual or group, published the Bitcoin whitepaper in 2008. The paper is called "Bitcoin: A Peer-to-Peer Electronic Cash System."
The whitepaper explains how Bitcoin can be used as a more efficient and decentralized form of money, outside the traditional banking model. It gives technical explanations of how the peer-to-peer Bitcoin network allows users to send digital currency without intermediaries. The whitepaper also outlines how the Bitcoin network is resistant to censorship and double-spending attacks.
The project launched two months later in January 2009.
The Ethereum whitepaper (2014)
While Bitcoin launched the crypto industry, Ethereum played a pivotal role in the development of the blockchain space. The Ethereum whitepaper was published in 2014 by a young developer named Vitalik Buterin and titled "Ethereum whitepaper: A Next Generation Smart Contract & Decentralized Application Platform."
In the Ethereum whitepaper, Vitalik outlines how the platform's intentions differ from Bitcoin's. The whitepaper outlined how the platform would allow developers to create and launch decentralized applications (now commonly known as dapps) and included technological solutions that backed these goals, such as the Ethereum Virtual Machine and smart contracts.
Crypto whitepapers are not legally regulated, meaning that anyone can write one. Although a cryptocurrency whitepaper should provide readers with an understanding of what the project plans to do and how, it's crucial, if you're interested in a particular project, to consider red flags and risks when reading through the document.