A big topic on the crypto market are white papers, which are essential for many investors in a purchase decision. However: Especially newcomers often don’t know what whitepapers like Bitcoin Whitepaper are all about. Therefore we answer the most important questions here: What are crypto-currency whitepapers? What information do they contain? And why are they so important?
Whitepapers as revenue generators
An overview: In the first half of 2018 alone, over $13.7 billion in Initial Coin Offerings (ICOs) were raised in the crypto-currency sector – twice as much as in the whole of 2017. A central component of an ICO, with which the developers and companies behind a new crypto-currency raise money at the beginning, is the white paper With the whitepaper a developer or company advertises a new coin.
What is a whitepaper?
The whitepaper contains all information about the fields of application of a new crypto currency, the technology behind it and the problems that the developers want to solve on the market with their crypto currency. A crypto-currency whitepaper thus helps early investors at the ICO to make an informed purchase decision and plays a significant role in the success of a coin. The majority of all investors rate the importance of a white paper as very high and ascribe a great deal of importance to it in their investment decision. So when buying Bitcoin and Ethereum, the white paper was an important criterion for early investors.
A white paper usually contains the following sections:
- The “Abstract”: an introductory and summarizing overview
- The description of possible problems on the market and the solutions that the new coin offers here
- The USP (Unique Selling Point) and the business model behind the coin: why the coin will bring profit to its investors
- The technical details of the currency: often difficult to understand for laymen, contains concepts such as peer-to-peer technology, hashs, cryptography and more
- A summary of the purchase arguments
The crypto-currency whitepaper thus contains the technical description and the buy recommendation for potential investors. The paper is usually available as a PDF document and can be downloaded and read freely on the Internet. If you are interested in the technical details, it is worth learning technical terms like Token Usage Guidelines, Average Network Value, Velocity and more. These describe the developers’ assessments regarding price development, coin network reach and future prospects. We also recommend that you read our CryptoCurrency Trading Guide.
Cryptocurrency Whitepaper: Important information for investment decisions
Also the “Road Map”, which a company often presents in the crypto-currency white paper, is important for you as a trader: The Road Map describes how the development of the coin should proceed in the future and gives a rough time schedule for this. Keeping an eye on courses such as the Bitcoin course is worthwhile from the beginning. Very important for investors: If you buy an older currency whose development has clearly not been followed after reviewing the white paper, this is often a bad sign and the project management in such a case is usually flawed. A kind of “mission statement” is also usually included in a whitepaper. This describes which problems the coin developers want to solve with their currency. In the case of BTC, the financial crisis of 2008 was the incentive for the implementation of an electronic, decentralized peer-to-peer cash system. This should protect investors from government intervention in their investments. And that’s exactly what crypto currencies still stand for today – thanks to the original Bitcoin white paper.
Whitepaper as a chance for developers
The crypto currency whitepaper also represents a great opportunity for the inventors of a coin. Before there were ICOs, the so-called “Initial Public Offerings” (IPOs) for small companies and developers were extremely time-consuming to present products. The whitepaper also enables these developers to present their ideas in detail on just a few pages in the form of a PDF document.
The Bitcoin Whitepaper as template for all whitepapers on the market
The tradition of the Crypto Whitepaper goes back to the time when digital currencies were created: With the Bitcoin Whitepaper, BTC inventor Satoshi Nakamoto created the basis for the coin revolution in 2008. The Bitcoin Whitepaper is possibly the most important document in the history of crypto currencies. In it, Nakamoto revealed all the technical details of Bitcoin, explained his motivation to revolutionize the currency market after the 2008 financial crisis, and for the first time made the principle of peer-to-peer and encryption using hash and block-chain technology accessible to a wider audience. The Bitcoin white paper included
- An Abstract
- Details on transactions
- Sections on Timestamp Server
- The explanation of the proof-of-work principle (as an alternative to proof-of-stake)
- payment verification
- privacy concerns
The Bitcoin Whitepaper is also available in German on the Internet. It is a good entry point for investors to read up on the subject.
Is it worthwhile to study whitepapers?
Yes, it is worthwhile. As you have seen, reading a crypto-currency white paper is an indispensable resource for proper and informed investing. When buying crypto-currencies, keep the respective white paper in mind. Our stock market overview will help you find the right broker in the next step.