The hype of crowdfunding through ICOs was felt more in 2017 than any year in the blockchain space. As an investor, there are a lot of aspects of a project that you can analyze in order to decide on the ones to invest in. One of these is the white paper.
What is a White Paper?
A white paper is a document used to explain the technology and competitive analysis of a particular project or a company. In the blockchain space, this document should contain a detailed description of the system architecture and its benefit to the current market. It should also show the anticipated growth, use and issue of their tokens.
The absence of a proper white paper may limit the progress and success of a project in the market. Also, it may lower the chance of succeeding in an ICO. As an investor, this is one of the documents you should look at when considering investing in ICO because it has all the important information you will need to understand about the project.
You should look at these features of a white paper when considering the project as your investment. It is wise to remember that ICOs are a high risk investment. This can mean a loss of your money. You need to be confident in the projects you invest in, and also invest in what you are willing to lose.
The success of an ICO and any other project hugely depends on the team working on its development. The white paper should list all information regarding the team members, their experience in their respective industries and any other projects they have worked with.
This information will give investors a sense of the quality of the management. It can also give you the likelihood of the success of the project in the ICO and once the project goes public. You should look at
- the names of the team members, visit
- their social media links or
- any provided links to their work.
Also try to see what other successful blockchain projects or ICOs they have been involved in.
The white paper should have the prototype data, their development strategy and first users. The tokens of a project with users and an ecosystem will have better chances surviving in the market. the white paper should also have different use cases describing how different stakeholders can benefit from the product.
The white paper should present a detailed working plan or road map for the next 1-2 years with the inclusion of a beta version launch. Projects that have a beta version in the market or certain tasks on their roadmap performed before their ICO also show an advantage for the project team.
Problems and proposed technical solutions
Most ICOs are meant to serve a different purpose from the traditional IPOs. Their products have been developed by startups identifying problems in different industries and proposing the sale of technical solutions. The ICOs are therefore an offer from promoters for coins with varying security, currency and utility features for different technical solutions.
You should look and analyze the technological proposition of a project. The language used to make investors understand the basic underlying technical solution should be simple. You need to see the problem and the need for the solution. If there is no need for a blockchain solution for that problem, then it might show that the project might not succeed well after their ICO.
A token can have different economic and qualitative features such as currency, securities and utility. There should be disclosure for the tokens which will have to comply with certain rules such as ERC20 standard. All facts such as trading restrictions and issues with listing of tokens in different exchanges should be disclosed.
This information should also show the quantity of the tokens, intended use and allocations for reserved coins for founders. Also options to liquidate in case investors choose that option should be listed.
This is in short to explain to you how you will benefit from holding the tokens. You should therefore look out for projects which have created a token that can increase in value as the company gains traction.
The white paper should show a detailed plan of the use of funds generated from the ICO. A good project will link their token distribution/allocation to their roadmap since each milestone requires a different amount in funding.
Be on the lookout for the token allocation stage as projects release their tokens at different stages. Some projects have shown that releasing tokens in different stages or after the release of a beta version creates a positive hype around their project. Hence, increasing the value and growth of their tokens.
There are other different aspect and topics that you should look at when evaluating a project to invest in depending on their white paper. This list is not exhaustive but shows you the most important factors that you should take note in a white paper. This list does not claim that the perfect white paper will have the most successful project in their ICO either.
These are insights which are meant to help you in your investment journey and also help you analyze different ICO projects. You need to be convinced by the white paper that the project is viable. The tokens you will purchase should have a potential to bring you value, since it is an investment.