A whitepaper is a summary of a cryptocurrency project which tells us how it functions, its purpose, and its future direction. Reading a whitepaper can give us a good idea about whether or not to invest in a project. However, most find it difficult to read whitepapers since they may seem very long or technical. Fortunately, there are some key points most whitepapers have that can give us a good idea about their project. Let’s go over them!
Reasoning for making - A whitepaper should contain the reason why the crypto project was made. This often states a real world issue that it aims to tackle.
Utility - This is the use case of the project which essentially tells us what it does. Examples of utility would be a coin with fast transaction speed, one that reduces trading fees on an exchange or one that powers a gaming ecosystem.
Blockchain architecture - The blockchain architecture primarily describes the consensus mechanism that the said crypto uses. The most common consensus mechanisms are proof-of-work (PoW) and proof-of-stake (PoS).
Tokenomics - It is important to know how many tokens a project has as well as where they will go. Tokenomics tell us about how finite/infinite a token is, whether the supply will increase/decrease over time and inform us about how the token is distributed among holders.
Roadmap - A roadmap is simply a glimpse about the future direction of the project.
Team - The team tells us about the people behind the project. Most projects have a doxxed, reputable team but some projects choose to remain anonymous for privacy.
References - Here we can see the sources from which the whitepaper drew information from. Decent whitepapers will have credible sources such as scientific journals and not just random websites.
By knowing what to look for in whitepapers, understanding different crypto doesn’t need to be difficult anymore. Just be on the lookout for these points and you’ll know what any project is all about. You’re now one step closer to being a better crypto investor, Ka-Bit!
