Basics

What is a ‘whitepaper’ and why is it so important?

A white paper is a detailed document that describes a number of core aspects rated to a particular crypto project, such as its utility, digital framework, roadmap, team details, etc.

Ever since the crypto boom of 2017, the term ‘whitepaper’ seems to have gained an immense amount of traction online. This is because, between 2017-2018, a total of $21.4 billion was raised via various Initial Coin Offerings (ICOs). 

Due to the fact that each of these ICO projects came with their very own whitepapers, the term was suddenly thrust into the mainstream as there were, quite literally, hundreds of these documents making their way into the crypto market on a daily basis, at one point.

So what exactly is a whitepaper then? In its most basic sense, it can be thought of as a detailed document pertaining to a particular project that is released by the founders of a startup in order to garner monetary, as well as, social traction for their project. If well written, this single document alone can pretty much transform the future of a company, allowing it to rake in millions of dollars within a matter of days.  

The technical nitty-gritty involved

A meticulously crafted whitepaper, more often than not, draws the attention of its readers not because of its sleek, attractive outlay but rather for its technical and in-depth discussions regarding the project in question. Some of the key aspects that most high-quality whitepapers touch upon include:

  • The exact problem that the project is looking to address and how it seeks to solve it.
  • The consensus algorithm (PoS, PoW, etc) that the platform is going to employ.
  • The total number of nodes – i.e. validators who authorize transactions – that will be present within the ecosystem.
  • The mechanics of the platform’s native tokens and how they can be used to facilitate transactions across the system.

Most whitepapers feature a clear vision as to how they will use all of their raised funds, giving a detailed breakdown of how much money will go towards development, how much will be used for PR and media campaigning, how much will be set aside for the founders, etc. This is done primarily in order to bolster investor confidence so that they know where exactly their hard-earned funds are going.

Additionally, these documents also contain a detailed roadmap of how the project will be rolled out for public use, i.e. when the platform’s native tokens will be airdropped or made available to investors for purchase, when specific implementations and hard forks will be initiated, so on and so forth.

Lastly, a whitepaper should ideally contain a fairly detailed bio of all the core individuals – like its founders, CEO, CTO, CIO, CMO – associated with the project in question. Any project that fails to provide these details should immediately be viewed with a certain degree of suspicion since it quite clearly shows a lack of transparency on behalf of the founding team.

Why have white papers become so popular?

Originally set out to be brief reports that were used by British parliamentarians in the 19th century, whitepapers have now made their way into the information technology (IT) industry in a big way, both as a technical instrument as well as a medium for P2P/ mass marketing.

Also, for an increasing number of younger investors who may be looking at alternative investment avenues other than stocks, commodities, whitepapers are becoming an extremely handy tool since they allow them to clearly understand the technological and monetary propositions being put forth by the project they are looking explore. 

Lastly, the fact that these documents can be passed on via email, accessed seamlessly via websites, sent across as media attachments using social media messengers, or even transferred by hand, makes them an ideal medium for advertising as well as fundraising.

Key Takeaways

  • The use of the term white paper made its way into the consciousness of the masses following the ICO boom of 2017.
  • A white paper is a detailed document that describes a number of core aspects rated to a particular crypto project, such as its utility, digital framework, roadmap, team details, etc.
  • Well-crafted whitepapers can allow startups to acquire millions of dollars in funding within a short span of time.
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