In assessing the potential of a cryptocurrency project, especially one in the initial coin offering phase (ICO), the first place to start the analysis is always the whitepaper of the project.
A white paper is an authoritative report or guide that informs readers concisely about a complex issue and presents the issuing body's philosophy on the matter. It is meant to help readers understand an issue, solve a problem, or make a decision.> https://en.wikipedia.org/wiki/White_paper
The purpose of a white paper in the cryptocurrency space is to explain in detail what a project entails. This includes an explanation of the product and the underlying technology, the problem that the product will solve, the details of its digital token, as well as information about the project's foundation team and its platform roadmap.
The most famous cryptocurrency paper is the Bitcoin white paper entitled "Bitcoin: a peer-to-peer electronic cash payment system," which was published by Satoshi Nakamoto, the mysterious creator of Bitcoin, in 2008 and led to the creation of the first decentralized coin digital.
In this guide, you will learn how to read a white paper in order to start the analysis of your next potential cryptocurrency or ICO investment.
Why read the white paper?
The three main reasons for reading a cryptocurrency white paper are to understand the project, to find out if the problem that the project aims to address can be solved using this blockchain solution and if the digital token of this project makes sense as an investment.
The information in the white paper should answer all three key questions.
What to expect in a white paper
Abstract
The abstract of a whitepaper is there to give you a quick overview of the project and to lure you to read the whole document to learn more about the project and its cryptocurrency.
Introduction
The introduction often introduces basic concepts such as blockchain and the benefits of cryptocurrencies and discusses the market that this specific blockchain project intends to include.
Problem definition
The definition of the problem digs a little deeper into the market that the project is targeting and highlights the challenges encountered in this area that need to be resolved. The challenges can be technological or related to the business. It may also include the current solution that is not sufficient to fully address the problem in question.
Product description
Below you will find the product description of the project, which will describe in detail what the platform, product or service does, how it will work and why it provides an excellent solution to the problem mentioned above.
Technical details
This will be followed by the technical details of the blockchain project, which will be an in-depth technical explanation on how the product is developed, what technological specifications it has and how its coin or digital token will come into play.
The digital token
The next section will explore how digital tokens or the new currency will work, what kind of money supply management will be implemented and how it will benefit the users of the new platform and/or the cryptocurrency community in general.
Crowd sale details
If the white paper was published as part of a token sale, you would find details on the next crowd safe. This will include all relevant launch dates, any bonus schemes, details on who can and who cannot invest, how the funds raised will be used, the project roadmap, etc.
Presentation of the team
Towards the end the whitepaper, you will usually also find a presentation of the founding members of the project and the main developers. This is important as a strong team of experts is an integral part of a successful cryptocurrency project. So you will find the professional experience of each team member and the role they will play in the project in this section.
Conclusion
Finally, the white paper will end with a conclusion, which summarizes the key points of the project and usually acts as a call-to-action to be involved in the case of an incoming token sale.
Look for the important
If you're looking at several new projects to potentially invest and want to have a quick general impression about the project before digging deeper, you can scan through the whitepaper to find the answer to the most pressing questions you should ask yourself before investing in a project.
These questions include: Is the project legitimate? Does the team have enough experience to provide? Is there a market for the proposed product or service? Who are the competitors? What is the purpose/function of token? Can the token be replaced by any existing cryptocurrency? Etc.
Search for More Information
While a project white paper should cover all the important aspects of a cryptocurrency project, if you are thinking about making a substantial investment, your research should not stop here.
Platforms like Reddit and the BitcoinTalk forum tend to provide information.
Reference
1.cryptonews.com
2.wikipedia.org