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The importance of White Paper in Cryptocurrency 

23 June, 2022 Blockchain

White Paper is a term that you have certainly encountered a lot when learning about and investing in Initial Coin Offering (ICO) projects –  the first token issuance. In the Cryptocurrency market, any ICO project that comes out requires a White Paper. 

What is White Paper?

A white Paper or White Paper is a report or guidance from an authority to help the reader understand, solve, or make a decision about a problem. Also in the Cryptocurrency market, a White paper is drafted to describe in detail the ICO project that a company or organization will implement. When developers publish a White Paper, it is an explanation of the technology and the purpose of their project. Investors can learn about the origin and purpose of cryptocurrencies from this section. Through the White Paper, they can have an overview of the project, thus decide on whether to invest in this cryptocurrency project?

White Paper often comes with One Pager – a one-page project summary and Position Paper, which details competitors and their position relative to those competitors. 

The importance of White Paper

Today, when many tokens appear in the world of cryptocurrencies, investors, as well as developers of the project, begin to see White Paper as an important document in the development of the project in the future.

When it comes to the project itself, it can be seen that the White Paper serves as a tool to attract potential investors. White Paper has often used for new projects or just new ideas with no products or services yet. In order to attract communities and raise funds for the project, the project development team needs to provide compelling reasons for people to see why the project is attractive to investors. If the information in the Whitepaper is skeptical and the development path is impractical, it will make it easier for the community to ignore the project. In addition, the white paper is a means of providing information to the crypto investment community.  White Paper is generally public and is widely available throughout the community during the period before the project launches. The main purpose of this document is to inform investors about important information related to the project such as the time of token opening, the price of publicly listed tokens and the location of the token opening, and how to participate in an airdrop event, etc.

When it comes to investors, White Paper is a tool to evaluate the project’s potential. Instead of searching for project information on other pages, just research the White Paper to know what this project is, what is the technology, what are the problems that the project solves, etc. Thereby, investors can have a more correct view of the potential of the project. In addition, if you have been in the cryptocurrency market for a long time, you will realize that not every project is unique and has its own characteristics. Many of the same projects are geared towards solving a problem, sometimes using the same tech stacks. Therefore, when we read a project similar to the previous project, we can predict how it will work.

What is the right way to evaluate a crypto project through White Paper?

Before you decide to invest in any project, White Paper is your first information source. Here are the sections you should focus on to identify what makes a potential project.

Project location and Partner system

To give investors confidence, any white paper should clearly list where the project is developed and who the partner is. If a project is developed in a country that is excited with cryptocurrency, complex legal procedures, such as in the US, will be a difficult issue. Even if the project ensures the successful implementation of the roadmap, there is nothing the law can do. The second thing to note is the project partners. A project with large partners capable of long-term development. The major partners are leading and prestigious companies in the world, with large capital in the market. To evaluate potential crypto projects, you can see who the project team’s background is. 

Project objective

To assess whether a project has potential, investors need to be mindful of its purpose. Did the project’s purpose solve any problems, did the project improve more than the previous project? This information will be found at the beginning of the White Paper. If any White Paper outlining the intended use of the project is useful in daily life, this project has high potential. In addition, you need to look closely to see if the project was built from your foundation or based on other versions and then change a few features. 

Tokenomic

In addition, you need to look closely to see if the project was built from your foundation or based on other versions and then change a few features. Specifically, the project development team will calculate how to design the number of tokens in accordance with the operating mechanism.

The amount of supply is affected by the following factors:

  • Inflation: Occurs when the number of coins is too large, which results in a decrease in the value of the coins.
  • The number of coins allocated: If the number of coins is in the development group and the sharks are huge, they will lose their price when they hit the market. 
  • Time the coin is locked in during ICO: If the time is long enough, the coin price will not fluctuate much.

The amount of demand is affected by the following factors: Staking rewards, trading fees, and other benefits are factors that make investors buy and hold coins. You should read the whitepaper carefully to know if the development team, in addition to producing coins, also creates more dApps (decentralized) applications that need that coin to operate. If the project follows the plan, there is a chance that the coin will have a high demand leading to an increase in price. 

Roadmap

The purpose of the Roadmap is to outline the development plan of the project including what next events will happen, what issues will be solved, what tasks have been completed and when tokens will be offered for sale… The roadmap needs to be extended by several years with many milestones through each period. Investors need to read the roadmap to see if the project is on track. It should be noted that not every project with a roadmap is a potential project because sometimes some White Paper list roadmap due to legal issues. 

Hopefully, this article will help you understand the White Paper better. White Paper is one of the key elements for an assessment of a potential ICO project. In addition, in order to select a good project, you should also consider other factors such as fact-finding, verification of important information in the White paper, timelines set by the development team…

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