What is a Crypto Whitepaper and How Does It Work?
What is a Whitepaper?
A whitepaper is a type of detailed report or description that is published by the founders or creator of a project. The whitepaper contains information about a project such as technical structure, goals, special features, working method, impact, future vision, etc.
Whitepaper is published for the benefit of users of the project and all related stakeholders. In some cases, Whitepaper can also share segmented details about a project such as how software addresses a particular issue.
In simple words, a whitepaper contains information that a developer, creator, or founder wishes to share with their users. At the same time, whitepaper can also serve as an instruction manual that guides users on how to deal with a given project. Furthermore, Whitepapers sometimes also allow developers to share the technical design and mechanism with other users to get free use privileges.
What is a Cryptocurrency Whitepaper?
Every person investing in cryptocurrencies is familiar with whitepaper on account of Bitcoin. The pseudonymous creator of Bitcoin Satoshi Nakamoto published Bitcoin Whitepaper. This whitepaper introduced Bitcoin as a peer-to-peer electronic cash that enables borderless and online transactions.
Ethereum, another major cryptocurrency also published a whitepaper that shared its mission of creating alternative protocols for decentralized apps.
Whitepapers bring the real-world utility of cryptocurrencies to light. It describes how to solve a given issue and how to add more efficiency in various areas of everyday activities. However, with proper knowledge and research skills, it is possible to compose a credible Whitepaper.
Therefore, scammers can take advantage of this skill and gain the trust of unsuspecting investors by publishing a whitepaper.
One such event took place in 2017, when an Initial Coin Offering (ICO) project that printed thousands of tokens dubbing it as an innovative idea. Many investors bought into the idea on account of a detailed whitepaper publication.
However, the project did not deliver real results or meet promised goals. Therefore, the investors have to ensure that just by associating a cryptocurrency with a project it does not warrant success or adoption.
How Does It Work?
Whitepapers for blockchain projects or DeFi protocols printing cryptocurrencies can contain information such as details about its consensus mechanism. A decentralized blockchain requires consensus to verify transaction records.
At the same time, Whitepaper also shares the tokenomics of a given project. Tokenomics is the mechanism that decides the distribution program of cryptocurrencies, the printing of new cryptocurrencies, burning programs, supply control methods, etc.
Most importantly, a whitepaper consists of a roadmap that informs users about the future plans of a given project. At the same time, Whitepapers have to be written in a manner that anyone can read and understand them.
Whitepapers add an additional layer of legitimacy and reliability to a cryptocurrency project. However, it is important that whitepapers contain technical explanations to ensure that all details resonate with readers with a technical aptitude.
What Makes Whitepaper So Important?
Whitepapers are one of the building blocks of the cryptocurrency sector. However, there is no standardized formula for making a whitepaper. The term whitepaper can be traced all the way back to the first premier of Britain Winston Churchill who published the Churchill Whitepaper in 1922.
Since then technical projects and firms have adopted the format with some of the most critically acclaimed whitepapers associated with names like Cisco, Hitachi Vantara, HSBC, Google, Uber, etc.
Whitepapers have gained popularity because they assist professionals from various walks such as researchers, engineers, developers, computer scientists, economists, and even mainstream users. Whitepaper allows relevant stakeholders to identify any blind spots or weaknesses in advance.
At the same time, it grants an insight into the work and effort that has been put into a project. In the same way, Whitepapers bring more transparency for users by allowing them to track adherence to the original plan.
Conclusion
Bitcoin is arguably one of the most popular whitepapers in the world. The blockchain sector adds new projects to the industry every day. In order to stand out from the crowd, project administrators can publish a whitepaper that is equally appealing to their technical and non-technical audiences.
