Cryptocurrency has been the subject of much debate within the last decade. Everyone, from crypto evangelists to extreme skeptics, has an opinion, but how can you, as an individual, form your own? Technical writers have been kind enough to write thousands of white paper documents regarding each coin and its unique properties. But you, the reader, must be shrewd in determining which cryptocurrency white papers are legitimate and which are scams. You may be wondering such questions as, what is a cryptocurrency white paper? What is the purpose of white papers on cryptocurrency? Therefore, before going any further, we will explain what exactly a cryptocurrency white paper is.
What Are White Papers for Cryptocurrency?
A white paper for cryptocurrency is a document that explains a cryptocurrency project’s objectives, potential, and technical and economic factors. The purpose of these white papers is to inform workers and stakeholders about the details of a project, how it works, its features, and its ultimate goal. A white paper on a potential cryptocurrency can also help to promote the project, as they use factual information to prove how it can help people in real situations and perform the intended task more effectively than competing cryptocurrencies. This, in turn, gives people a solid reason to consider using the cryptocurrency.
With the idea of a cryptocurrency white paper and its purpose being explained, it is time to go on to what you need to look out for when reading white papers on this topic. Please be advised that this is not investment advice. Whether you “strike it rich” or “strike it broke” in the crypto space is entirely up to you! That being said, there are a few red flags in a white paper that should make you question its credibility:
Unverifiable Blockchain White Paper Authors
The technical writers of a cryptocurrency white paper should be easily verified. In most cases, you should be able to find these people on social media websites, job board sites, well-known academic journals, peer review websites, company profiles, or even official background screening sites. The authors should not be digital ghosts since most technical writers tend to complete more than one academic paper. If you cannot find the writer of a white paper, then you should at least be cautious about that paper. Do a reverse image search, and confirm photoshopping if you find photos and images of these people. Be diligent!
An abstract is a brief overview of the white paper. It should give a general idea of what the white paper discusses and what the purpose of the paper is. In addition, it should be short, clear, and concise. The reader should know the purpose of the entire white paper without the writer having to provide excessive details. If reading the abstract leaves you scratching your head or desiring to send a clarification email for better understanding, you may want to question the source of this information.
Maturation and Citation Concerns
The definition of maturation is the process of reaching a stage of complete or advanced development over time. In the case of cryptocurrency white papers, this began 12 years ago, when the first cryptocurrency white paper, the Bitcoin white paper, was released. This means any credible white paper will discuss coins created after that date, although the technology it is based on could be older. Such a white paper should also have citations explaining the data’s origins and its inception date. These citations ensure that a white paper’s information can be confirmed and referred back to. Question any white paper missing a reference section.
Valuation is defined as the estimation of something’s worth. The value of cryptocurrencies, in particular, derives from users’ trust in them. Specifically, as their trust in the efficiency and security of the cryptocurrency system increases, demand for them increases. This then raises the use of that particular cryptocurrency, increasing its value. This makes for a highly volatile value and market that could change as frequently as hourly as people’s trust in cryptocurrency changes. If a cryptocurrency white paper promises you specific return amounts or instant “financial freedom,” you may want to question the integrity of that white paper’s writer.
Cryptocurrency has no legal protections since it is backed by trust and is not insured by the federal government. Legal protections typically come from federal laws, rules, and regulations. Some cryptocurrency white papers may claim that cryptocurrencies receive government support. However, because the government does not insure cryptocurrency – although it does list it on federally regulated markets – users can not expect to receive compensation from the government if something happens. If a white paper claims otherwise, you should probably question the integrity of that white paper since those claims would go against the intent and nature of cryptocurrency.
Before leaping into the world of cryptocurrency, one must decide how and where to store their digital assets securely. One effective way of keeping them is by using a self-custodial wallet. Self-custody means you will be in charge of securing your digital assets and most likely using a “private key.” A private key is a password or code that people use to complete cryptocurrency transactions and prove that they own the crypto coins or tokens exchanged. If a cryptocurrency white paper requires you to enter your private key on that company’s website or send your key info to them in an email, you should avoid that cryptocurrency white paper altogether.
How to Analyze Cryptocurrency White Papers
The above list shows what kind of cryptocurrency white papers you should avoid. However, it is also essential to know how to analyze such white papers to identify ones worth reading. By determining whether a white paper has the elements below and how well they are explained and planned, you can get an idea of its overall quality.
First, you should determine what the cryptocurrency project should achieve and figure out how sound it is. Next, figure out if the project described is needed and who it would help, as well as how it compares to competing projects meant to achieve the same goal; a good white paper should be able to answer all of these questions. Also, consider whether the goals are realistic. If a white paper describes unrealistic goals, the project is likely poorly planned. In addition, determine whether the plans for implementing the cryptocurrency system are adequately explained and could potentially work. Clear and detailed explanations for these elements indicate a higher-quality white paper. By the time you have finished reading the white paper, it should have answered all or most of your questions.
How to Create White Papers for Cryptocurrency
The instructions below will ensure you know how to create cryptocurrency white papers if necessary and provide further hints for determining which papers are good quality. Remember the information provided in the previous section when writing a white paper. Specifically, try to answer any question about the project you think readers might have. In addition, any white papers on the potential cryptocurrency should be of the highest quality you can make them.
First, you need to explain the objective of the cryptocurrency project in question and why it is necessary. Then, explain how the specific project would achieve that objective and how the cryptocurrency would generally work, such as how transactions would be handled, how the cryptocurrency’s particular blockchain would work, and the token distribution and use system. After that, clearly and thoroughly explain the technical and logistical specifications of the project. You also need to create a “development roadmap,” a list of goals and periods of development for your project to reach within specific time frames.
The following examples of white papers for cryptocurrency can help you better understand what a paper needs to be of good quality and get its message across to readers. The Bitcoin, Ethereum, and Cardano white papers all demonstrate the level of detail and information an excellent white paper should have while avoiding the red flags listed earlier.
Bitcoin White Paper Explained
The Bitcoin white paper written by Satoshi Nakamoto first brought the idea of cryptocurrency into public awareness. The Bitcoin white paper explained how the Bitcoin system enabled peer-to-peer transactions without using an intermediary like a bank. It said this system would allow for electronic transactions using cryptographic evidence rather than trust between people or institutions. The paper stated this, in turn, would achieve Bitcoin’s goal of preventing fraudulent transactions by making a record of legitimate transactions in the form of a blockchain. The white paper explained this in extensive detail and made its ultimate goal clear for readers to understand.
Ethereum White Paper Explained
The Ethereum white paper describes the Ethereum blockchain system, which uses Ether as cryptocurrency. The paper explains how Ethereum’s goal was to develop a blockchain that could be used for purposes other than verifying transactions. Specifically, it states that Ethereum’s blockchain can be used to create smart contracts and decentralized applications. The white paper describes how Ethereum works and how applications can be made with it. It provides examples of such applications and who would find them helpful, such as crop insurance for a farmer.
Cardano White Paper Explained
Unlike the previous two cryptocurrencies, Cardano does not have a white paper. Instead, the white paper for Cardano’s proof-of-stake protocol, Ouroboros, acts as the white paper for the cryptocurrency system. The white paper states that through the use of Ouroboros, Cardano both can process transactions faster than Bitcoin and Ethereum – the former of which uses proof-of-work protocols instead and the latter of which initially did – and is more environmentally friendly than proof-of-work protocols. The white paper goes into great detail about how each aspect of the system works. It also provides data to support its claims of its usefulness and efficiency compared to Bitcoin and Ethereum.
Cryptocurrency White Paper: The Bottom Line
This list may have inspired you to begin your cryptocurrency journey. Many people are creating their own currency! And with the internet, it’s possible to find experienced technical writers to help you with this.
Whether you need a single technical writer for a brief project or a team of consultants to produce a complete line of documentation, the quality of our work is guaranteed for you. Our clients work closely with an Engagement Manager from one of our 30 local offices for the entire length of your project at no additional cost. Contact us at (800) 221-0093 or firstname.lastname@example.org to get started.
Written by Latrice M. Sillers