A whitepaper is a report or a guide created by an authority to explain or present a complex issue, or to introduce an audience to a new intricate subject.
In the world of cryptocurrencies, whitepapers introduce readers to the technology, innovations, and approach behind a coin. The creator of Bitcoin Satoshi Nakamoto talked about bitcoin in his whitepaper from 2008. The name of Nakamoto’s whitepaper was “Bitcoin: A Peer-to-Peer Electronic Cash System.”
The whitepaper by Nakamoto is a perfect example of a whitepaper behind a legitimate coin.
Nakamoto’s document starts with an abstract that quickly describes bitcoin and the technology behind it. In the introduction, Nakamoto talks about e-commerce and the Internet in general. He then describes how transactions would work on the bitcoin network, discusses problems and technology behind the network, including proof of work, time stamps, and privacy. The whitepaper by Nakamoto has eight references to credible sources.
The creation of such a whitepaper is a lot of work. Also, there needs to be a big idea for a whitepaper, technology and new features of a coin, which is exactly the reason why so very new coins come with well-researched and well-written whitepapers. A quality whitepaper is almost impossible to fake. While an altcoin developer can come up with a shiny whitepaper that claims to have a groundbreaking idea, the community of cryptocurrency users has experts in a myriad of technology and science fields and it’s won’t be long until one of the recognized experts explains why the idea is not going to work.
Reading a whitepaper is a great way to get an introduction to a new coin or an initial coin offering. If you haven’t done so before, start with reading the whitepaper by Nakamoto. Then, read the whitepapers behind the legitimate ICOs that had a lot of true success.
A quality whitepaper would typically include at least some citations. Just like Nakamoto’s whitepaper, it would have references to credible sources which can back it up when it comes to the description of technology and innovations. A link to a forum is not a legitimate or scholarly reference.
At the same time, the whitepaper is not a detailed description of the technology. It is a marketing and positioning tool, which is why it is a good idea to vet whitepapers of coins in which you plan to invest.
Just like with other areas of life, you want to find experts in the world of cryptocurrencies that you trust.
This task is not as hard as you may think because the most popular cryptocurrency forums have a lot of information that goes years back and is easily accessible.
You can go back a few years and start reading what different people were saying about various coins and initial coin offerings. Then, you can look at what is happening on the market currently and see who was right and who was wrong.
Finding experts that are competent when it comes to technology is also not that hard. Many of the people that supported bitcoin had technical degrees from some of the best schools in the world, such as the Massachusetts Institute of Technology. If you see that someone has a Ph.D. degree from a highly respected school, has been doing scientific research for a number of years and has a lot of published articles, then this person is a real expert in his or her field.
Generally speaking, if you see a link to a whitepaper on a website for a new coin, it is a good sign. It is even better is the paper has a lot of revisions or if the coin has a lot of whitepapers that explain different parts of the technology. It is an excellent indicator that developers of the new coin are serious about what they are doing and are not going to abandon the project after making a little bit of money.