What is a white paper?

In the crypto industry, A white paper is a document released by the creators or developers of a crypto project, i.e. Bitcoin, Ether, etc., that explains the cryptocurrency and its purpose. It shows buyers or traders how the technology was conceived and what it could achieve. This helps crypto traders understand what makes the coin different from its competitors in the crypto market.

Example: The Bitcoin white paper by Satoshi Nakamoto.

How to read a crypto white paper

If you aren’t tech-savvy, reading a crypto white paper can be confusing. Here are some things to look out for when reading a crypto white paper.

1. Why was it created: Every white paper has its origin story. The story behind its creation. It’s usually at the start of the whole thing. If not, you could scan through to seek it out. Understand what they wanted to achieve by creating the project and weigh it with other projects in the market to get a sense of its future value. The market analysis in the whitepaper will show you the exact need for the product and how it fits into the existing market.
2. What is its real-world utility: The idea might be great, but it might not have much real-world use. Obviously, a project like that wouldn’t last long in the market. Many cryptocurrencies would have more utility than just being a means of exchange. Some can be for the governance of a project. There are many cryptocurrencies with versatile uses.
3. Does the project achieve consensus in the network: This is the foundation of decentralized technology. It is essential because it tells us what systems would be used to confirm a transaction, is it proof of work or proof of stake, etc.
4. How are the initial coins distributed: Some projects have a large portion of their coins allocated to developers and shareholders. This could be dangerous and restrict project growth. Pump and dump schemes often operate like that. They would promote the project to increase its value and then sell them off as the price falls.
5. The project timeline: Some projects have certain timelines set for achieving specific goals. It includes statistics on the sales and when tokens would be launched.

In conclusion

This is one in a collection of beginners guides that we’ve released to help you understand the industry better. Check out some more by clicking here.