There is often a lot of hype around ICO’s, but the ICO whitepaper (or ICO white paper) is where the rubber meets the road. It’s where the company gives its most authoritative and concise outline of how they intend to make their cryptocurrency work in the real world.
(Ours and more can be found here.)
An ICO WhitePaper Is Different from an ICO
You can have a white paper without an ICO, but you probably shouldn’t have an ICO without a white paper. The white paper tells you what you’re buying into.
The ICO usually consists of some kind of offering document which includes the offering terms – how much of a thing some person or a company is selling for how much, and what that all means. That is not the same as a white paper. The Initial Coin Offer is conducted and leads to a token or coin generation event. The ICO whitepaper associated with the ICO is the document that details how their business and/or coin/token are supposed to work.
White papers historically emerged from governments explaining what they are going to be doing as a matter of policy before execution. Their function is to be both authoritative and informative. It is the distilled essence of what the business is offering.
The Best Cryptocurrency White Paper Ever
In the cryptocurrency world, the Satoshi Nakamoto white paper that established Bitcoin as the pre-eminent cryptocurrency is praised for its’ elegance, simplicity and brevity. In just 9 pages the white paper for Bitcoin (https://bitcoin.org/bitcoin.pdf) is the foundational document that has changed the world for cryptocurrency investors and basically invented an entirely new asset class. Anyone investing in cryptocurrency should read it. (We think you should read ours, too, at www.Startengine.com/sun-fund-dc).
Here are the first three sentences of the whitepaper that changed the world:
Abstract. A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution. Digital signatures provide part of the solution, but the main benefits are lost if a trusted third party is still required to prevent double-spending.
This paper is Bitcoins ICO whitepaper Big Bang moment. Do you see how clearly written and executed this paper is? All ICO whitepapers should be this clear and concise.
Now find any other ICO whitepaper on the Internet: Ask yourself, If the idea is too complicated to be stated simply, and if so, is it too complicated to be executed?
Crucial Questions to Ask of Any White Paper
Investors should also keep a few things in mind as they read any white paper:
- Look at the document and think about how much you’re investing. Imagine you’re paying only for this ICO whitepaper. Imagine if, having lost all your investment money in that company, could you look back at this document and say, This whitepaper was an eminently trustable document, its a shame the offer didn’t work out and feel good about your decision? You should look at that document the way you meet someone for the first time – what is your first impression? What happens when you dig a little deeper?
- Does this white paper describe anything more than just an abject pursuit to participate in a hot market with no real consideration for the underlying business model, high barriers to entry, well-heeled incumbents and other things that might make some of those claims implausible?
- Structure: Does the structure of the document flow from the way this cryptocurrency relates to real world inputs and outputs? The short pitch should make sense, and the longer explanation should also all add up as easily.
- Logic: Does it leave out, whitewash, or inaccurately state certain problems for the sake of convenience?
- Is there a real problem here that only blockchain can uniquely solve while simultaneously growing a market for this new type of product or are they just kind of saying, There are buyers and sellers of X and we’re gonna stick some blockchain in between them and they have to use it because it’s cheaper.
- Formatting, spelling and grammar: If these elements are off the mark, then you have to ask yourself why the authors couldn’t find time to produce a clean document in exchange for your trusting them with your money. If they cant be bothered to do this simple work before they get your money, how accountable do you think they’ll be after they get your money?
We hope you’ll use online research and social media to learn about interesting ICOs, but we also hope you’ll pick up and develop the habit of reading these potentially tedious (and at-times unintentionally hilarious) documents so that you can begin to develop a sense of weak and strong offers.