What is a Whitepaper?
In the cryptocurrency space, a whitepaper is a document presented by a start-up with the intention of informing and encouraging investors to participate in the start-up’s ICO. If you are unsure about what an ICO is, then please check out this article here.
A whitepaper contains more technical and in-depth discussions on the project that the start-up is building. This could include: The consensus algorithm the project decides to use, how the nodes that operate on project's platform would function, and the token system.
Although not all white papers will have the same structure, they tend to discuss in some form or another the following topics:
- Definition of the problem
- Project’s technical solution
- Applications of the project
- Token sale
An introduction is important in providing a primer as to what the reader can expect from reading the whitepaper. It can vary in technical difficulty depending on the audience that the whitepaper is intended for.
Definition of the problem
A definition of the problem that the start-up is trying to solve provides context as to why the project is needed in the first place. The clearer the definition of problem to the reader, the easier it becomes for them see the need and therefore the potential benefits of the project.
Project's technical solution
The project’s solution to the proposed problem is an area of a whitepaper that tends to be more technical. It demonstrates to those able to understand that the project is feasible. It also shows to an extent, that the team behind the project has a good grasp of the technology in-order to successfully implement it.
Application of the project
A start-up’s white paper is likely to detail the relevant applications of their actual project. For example, the application of Bitcoin as a peer-to-peer electronic cash system. Or the application of Ethereum as a decentralized platform that runs smart contracts. It is paramount that a start-up can demonstrate a real-world application for their project.
A roadmap sets out a project’s objectives and a date for which they intend to achieve this by. A roadmap is important in managing the expectations of the people interested in a project. The more realistic the roadmap, the better managed the expectations of the stakeholders will be. If a project habitually fails in meeting the goals set out in their roadmap, it may be point of concern for the investor.
This final section of a whitepaper typically contains details on the sale of the token, such as: Duration of the token sale, the number of tokens that will be on sale, and how to participate in the token sale.
With the recent throng of ICOs, it is important to understand the information that present in their whitepapers. To do that, it’s important to understand what a whitepaper is.
Last Updated: 27th March 2023