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Whitepaper — A Crypto Project Essential Or A Formality?

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Nov 29, 2022
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7 min read
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This blog post will cover:

  • What is a whitepaper?
  • Why do crypto projects need whitepapers?
  • Are projects without whitepapers scams?
  • What should a whitepaper contain?

If you’ve been dabbling in crypto for the past few years, you might have already seen your share of the ubiquitous document that every crypto investor needs to read through before contributing: whitepapers. 

Whitepapers have long been used to provide technical information about a product or service to potential clients and customers. They outline how that product or service solves a particular challenge in technical terms. In doing so, whitepapers deliver not just the technical specifics of a product or service but also a marketing tool to pique the interest of investors to gain their confidence in their investment.

Whitepapers take on a more important role in the cryptocurrency and digital asset industry. And as we will see, they should be a “must-have” for every crypto project essential. Here’s why. 

What is a whitepaper?

The whitepaper contains all the technical, financial, and commercial information about a new cryptocurrency or blockchain protocol. Whitepapers are part and parcel of the crypto industry, but they have been used for the same purposes across industries.

While whitepapers aren’t typically required to follow a legally-prescribed format, they tend to follow a particular structure. They begin by outlining the motives of the project, followed by the challenges they wish to resolve, a detailed technical description of how the product or service works, and why the product or service is the best solution to the challenges raised.

In essence, the whitepaper is a proposal containing the purpose, processes, and solutions – the whys, whats, and hows of a crypto project – and reasons why the project is better than any of its competitors. Whitepapers lend an air of legitimacy and professionalism investors seek in crypto projects. A well-prepared whitepaper encourages people to invest, whereas a poorly-written one will have them running for the exits. 

Why do crypto projects need whitepapers?

It’s safe to say that almost 99.9% of cryptocurrencies and presale initial coin offerings will publish a whitepaper at some point to formalize their project and technology. Projects that don’t will raise red flags about their viability or legitimacy. Such projects are more likely scams or projects that won’t take off.

That’s why every investor’s first task before investing in a new project or ICO is to read the whitepaper — whitepapers are the final pitch to potential investors before they buy into a crypto project. And if a project lacks a whitepaper – or has one full of inaccurate information – informed investors won’t trust the technology nor invest in the project.

With thousands upon thousands of crypto projects (and more than its fair share of scams), it’s quite obvious why investors would be more cautious and demand the information they need. In short, a whitepaper isn’t just an essential and/or a formality for crypto projects. The success or failure of a crypto project can all be determined by several pages of a whitepaper.

There are no two ways about it: every crypto startup needs to have a whitepaper because it’s a crucial ingredient to help investors determine a team’s professionalism and a project’s long-term viability. Ultimately, whitepapers make or break a token.

Are projects without whitepapers scams?

Not all projects without whitepapers are scams, but if a project is withholding or restricting access to information about their project for no good reason, then it’s probably best to stay away from it. Of course, it goes without saying that projects that don’t put out whitepapers should be avoided like the plague.

Eloquent, descriptive whitepapers answering pertinent questions and providing tangible, accurate information about the project and its team could be one of the indicators of a project worth investing in. Of course, there are more points to check about every crypto project. Don’t forget to do your own research on each detail if you’re planning to invest.

You’ll want to make sure that the whitepaper contains details about the project’s goals, execution strategy, marketing plan, roadmap, and timelines for implementation, as well as information about the project’s founders and key team members.

Projects with flashy whitepapers and overly complicated technical mumbo-jumbo may lack the “steak” behind the “sizzle” or the substance behind the style. Meanwhile, an unassuming company website that may contain grammatical errors might have a whitepaper that has a viable concept and a rock-solid execution plan. 

However, scammers can be more elaborate with their ruses – it’s just as possible for fraudsters and fly-by-night operators to put together a convincing whitepaper. Along with that trick, crypto scammers have different schemes to fool people. To make sure you’re not dealing with one of these plans, check out our article

What should a whitepaper contain?

There isn’t a single formatting standard for a whitepaper. However, most blockchain or crypto projects would typically include the following content:

  • Introduction. The introduction lays out the fundamentals about the project and the problem it intends to solve.
  • Overview. This section includes a general overview of the industry wherein the project or service will be deployed.
  • Solution. A description of how the project or service will solve problems in the given industry, highlighting its advantages and drawbacks compared to other projects.
  • Token allocation. Whitepapers should clearly discuss how tokens are going to be distributed during every presale, IDO, or airdrop stage.
  • Tokenomics. Every project worth its salt should have the total number of tokens clearly defined from the beginning. This includes the economics behind the tokens, such as the total number, maximum supply, and tokens in circulation.
  • Roadmap. A well-defined roadmap outlines important dates for project milestones and deliverables. Above all, the project should deliver.
  • Disclaimer and risk factors. No project is without its risks and uncertainties. This section outlines legal disclaimers and technical risks. If something sounds too good to be true, it probably is.

Ultimately, the goal of a whitepaper is to communicate the value, vision, and purpose of a crypto or blockchain project – and in doing so, provide investors with a barometer of trustworthiness and the competence of the project team.

SimpleSwap reminds you that this article is provided for informational purposes only and does not provide investment advice. All purchases and cryptocurrency investments are your own responsibility.

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