What is a White Paper?

Key Takeaways

The crypto ecosystem can be daunting, with new projects and blockchains springing up constantly, and very little regulation. Whether you’re looking to invest in the crypto industry or simply trying to avoid crypto scams, knowing how to get under the bonnet of different projects is an essential skill. 

A white paper is an indispensable research tool for crypto users and anyone seeking to understand the value of an upcoming project. Bitcoin itself started life as a simple white paper, before going on to ro-order the global financial system.The moral of the story is that it pays to understand this technical document. 

In this article, we’ll unpack the different components of the humble white paper, and how to interpret one yourself.

Let’s dive in

What is a white paper?

A white paper is an informational document that provides an in-depth look at a proposed product or solution. It promotes the product, technology or service of a business and asks users to pick it over the competition. 

White papers are not unique to the crypto space. The concept started life in politics, and can now be found across many industries, including medicine, technology, finance, engineering and education. What distinguishes this type of document from other marketing materials is their length, formality and detail. They are generally at least a few thousands words long, and present you with statistics, research and expert opinions to support their conclusion. 

At its heart, a white paper is a sophisticated marketing tool. It lets prospective stakeholders get under the bonnet of complicated ideas before deciding to invest. In the lightning fast world of Web3, they are a staple for new projects. 

Key characteristics of a white paper

A white paper typically has several key characteristics that distinguish it from other forms of documentation:

• Authoritative Tone: White papers are written in a formal and authoritative tone, showcasing the expertise and credibility of the company.
• Detailed Content: These documents offer in-depth explanations of the topic, including background information, analysis, and potential solutions.
• Length: The paper is usually several thousand words long, making them shorter than e-books.
• Objective Analysis: White papers provide an objective analysis of the issue at hand, supported by data, research, graphics and evidence.
• Structured Format: They follow a structured format, often beginning with an introduction, followed by a discussion of the problem, analysis, proposed solutions, and a conclusion.
• Supporting Data: A white paper provides data in the form of statistics, graphs and/or expert opinions.
• Call to Action: At the end of a white paper, there is always a call to action, asking readers to sign up or request a demo.

Main purpose of a white paper

The primary purpose of a white paper is to convince readers that a specific product, technology or service is the best option on the market. White papers are often used to:

• Provide Insight: Offer in-depth insights into complex topics from a specific field, helping readers understand the nuances and implications.
• Define the Problem: Outline the specific details of the problem that the company is trying to solve with its product or service.
• Propose Solutions: Present the solution offered by the company to address said problem in the industry.
• Establish Authority: Position the issuing organization as a thought leader and authority in their field.
• Build Trust: White papers use a neutral tone backed by research and statistics to educate their target audience.
• Influence Decisions: Persuade stakeholders, including policymakers, industry leaders, and potential customers, to support or adopt the proposed solutions.
• Increase Sales: The end goal of a white paper is to drive sales by convincing potential new customers that the service or product offered is solving a real problem.

White papers are an important marketing tool that serves both the audience and the project itself. Not only do they educate readers but they can also be used to increase brand awareness, generate leads and boost sales.

Types of white papers

There are different types of white papers, depending on the way the information is presented and the goal of the document:

• Backgrounder: Provides technical evaluations, key insights, and promotions of an organization’s products or services.
• Market Research: Shares new or relevant original research findings to educate readers and demonstrate authority on a specific subject.
• Numbered Lists: These white papers use headings and bullet points to highlight key features of a product or service. For example, “10 Things You Need to Know About Data Centers”.
• Problem-Solution: Identifies a specific problem faced by the target audience and offers a data-driven solution.
• Technical Paper: Delivers detailed technical analysis of a product, service, or technology, aimed at users.
• Thought Leadership: Positions an organization as an authority in the field by addressing current issues in an informative way.
• Visionary: Presents forward-thinking insights, looking beyond current issues to where debates or technologies are heading.

How to read a crypto white paper

White papers play a vital role in the burgeoning crypto industry, where new projects are constantly vying for the crypto community’s attention – and investment. 

If you’re considering putting funds into a project, looking into its white paper should be your first step. To effectively read a crypto white paper and get the most out of it, here are the core elements you should be looking at:

Project Overview

The initial section provides a summary of the project’s objectives, vision, and the problem it aims to solve. It sets the stage for understanding the project’s potential impact. If the overview doesn’t outline the goal of the project or a problem it seeks to solve, then it’s lacking direction. That’s a red flag.

Technology and Innovation

Crypto is all about tech and innovation. Most of the successful projects are constantly pushing the envelope to create something new and efficient. Look for detailed descriptions of the underlying technology, algorithms, and protocols. Understanding the technical foundation can help investors assess the project’s feasibility and level of innovation.

Market Analysis

Is there a demand in the market for what the project is trying to achieve? This part is important as it outlines the market potential, target audience, and the overall competitive landscape. Investors should look for projects that have high potential for wide adoption and growth.

Tokenomics

The tokenomics of a project such as token supply, vesting schedule, distribution, utility and others play a crucial role. Analyze the initial supply of circulating tokens, when additional tokens will be unlocked and what percentage of the supply is held by the team. Pay special attention to the utility of the token. If there’s no incentive for users to get the token, in most cases, the project is doomed to fail.

Developer Team and Advisors

A crypto project is only as good as the team behind it. If the team is entirely anonymous, you won’t have the chance to research those individuals or see their past projects. Showcasing the experience of the team is often a great way to promote trust within the community and potential investors. Assess the expertise of team members and advisors to make a more informed decision.

Roadmap

The term roadmap is used to describe a clear development timeline and milestones. These indicate the project’s progress and future plans. It helps investors understand the short-term and long-term goals of the project.

All of the points above, except for tokenomics, can also be applied to traditional white papers.

Examples of white papers

Technology is a vast, lucrative and fast-moving space, where new developments often seem to shape the future in big ways. But even the biggest projects were probably launched with an unassuming white paper. Here are a few famous examples:

Bitcoin

One great example of a white paper is the Bitcoin white paper by Satoshi Nakamoto, titled “Bitcoin: A Peer-to-Peer Electronic Cash System”. To this day, it’s one of the most influential documents in the crypto space. It was a direct answer to the financial crisis of 2008. 

Satoshi’s white paper introduced the concept of decentralized digital currency and blockchain technology. As a result, it set the foundation for the entire cryptocurrency industry. It’s safe to say that if it wasn’t for the Bitcoin white paper, crypto might not even exist.

Smart contracts

Today, smart contracts are the lifeblood of Web3, allowing for the creation of a universe of decentralized applications. But smart contracts wouldn’t be possible without the initial white paper by Nick Szabo. 

In 1994, the computer scientist laid the foundational theory for smart contracts, proposing the idea of self-executing contracts with their terms written in code. As a result, smart contracts would become a central element in blockchain technology, enabling automated and trustless transactions.

Ethereum

Ethereum is the second-biggest blockchain in the world in terms of market cap and the network with the most users. It all started with the Ethereum white paper by Vitalik Buterin, introducing the concept of a decentralized platform capable of running smart contracts. The idea would expand blockchain technology beyond cryptocurrency and enable developers to create decentralized applications.

Why Is It Called a White Paper?

The term “white paper” originated in the UK, where it referred to documents used to present policy proposals and recommendations. 

These documents were meant to help the general public to understand a problem, describe the government’s stance on it and ask for its opinion. As a result, “white paper” became the perfect term to describe a comprehensive and authoritative document on a new technology or project. 

Gobernments use white papers to gauge the public opinion on controversial matters before passing new legislation. One of the earliest famous examples of a white paper was Churchill’s white paper of 1922.

Closing thoughts

White papers play a crucial role in providing detailed information and supporting evidence about a project, as well as building trust with potential stakeholders. 

They are valuable tools for organizations to communicate their expertise, propose solutions, and establish themselves as leaders in their respective fields. Understanding the structure and purpose of white papers can help readers make informed decisions and stay informed about complex issues. The role of white papers is even greater in crypto where they serve as the initial value proposition for a project.