Crypto Whitepaper: The Ultimate Guide for Beginners
That’s how much Initial Coin Offerings (ICOs) have raised in the first half of 2018 alone!
When you consider the fact that that’s nearly double of what ICOs raised in the entirety of 2017, you can see why they have become such a hot topic.
Before ICOs became a household name, companies in the fiat world were already doing IPOs or Initial Public Offerings. The idea is very simple. Private companies become publicly traded by selling shares of their company to the public. IPOs require a lot of due diligence, formalities, and paperwork. Because of this, several deserving companies lost out on lucrative opportunities.
This is when ICOs came in and changed everything.
(NOTE: We are NOT saying that it is a good thing that ICOs doesn’t do so much due diligence.)
Developers and entrepreneurs finally had the chance to raise millions of dollars without going through excruciating paperwork. The only thing that they had to do was to present a whitepaper.
Now, consider this for a moment.
The entire fortune and the future of the company, is revolving around the quality of this whitepaper. This is the reason why it is so important to get the whitepaper right. This single PDF, if done correctly, can fetch you millions of dollars in under 24 hours.
What is a Whitepaper?
According to wikipedia, “A white paper is an authoritative report or guide that informs readers concisely about a complex issue and presents the issuing body’s philosophy on the matter. It is meant to help readers understand an issue, solve a problem, or make a decision.”
The earliest known use of the term “White Paper” was with the British Government and the Churchill White Paper of 1922. Back then, it was considered to be a less extensive version of the blue book, both terms having been derived from the colour of the document’s cover.
Ever since then, white papers have evolved to become a business owner’s best friend. No other piece of document better explains to your investors:
- What are the problems that you are looking to solve?
- How will your business solve those problems?
- How will your business evolve in the future?
Importance of a Whitepaper
According to some surveys done in 2009 by the Savvy B2B Marketing blog “trial software and white papers are the most utilized, along with being among the most effective, forms of content for researching IT problems and solutions”.
They also quizzed various potential investors and found out that:
- 77% have read at least one whitepaper in the last 6 months as compared to 68% in their 2008 survey.
- 84% of them rated whitepapers as moderately to extremely influential when making technology-purchasing decisions”
Eccolo Media also conducted some survey back in 2013. The survey covers a plethora of content marketing topics – including which collateral types are most frequently consumed and considered most influential – as well as the stages of the sales cycle in which they are perceived to be most persuasive.
Here are some of the conclusions that they have drawn from their research:
- 49% of the respondents claimed to have used white papers to evaluate a tech purchase, making it the most frequently consumed content type
- Whitepapers came out ahead of case studies/success stories, product brochures/data sheets, detailed tech guides, and video/multimedia files as the most influential form of content marketing
- Whitepapers are the best form of content during the pre-sale phase when your target investors are unaware of the problem you are solving
- Every 7 in 10 respondents said it’s important or very important to continue to receive content from the vendor after the sale has been completed. White papers are clearly the most preferred content type post-purchase, followed by case studies and tech guides.
If these statistics and numbers still haven’t convinced you, then let us take you back in time to 2008, when an anonymous programmer named Satoshi Nakamoto released their whitepaper titled, “Bitcoin: A Peer-to-Peer Electronic Cash System”. That whitepaper not only introduced us to Bitcoin, it paved the way for other cryptocurrencies and the entire ICO industry. That whitepaper acquainted us with the blockchain technology.
That single whitepaper has defined an entire era and has led us to a multi-billion dollar industry. A well-written and well thought out whitepaper can revolutionize an entire industry.
Things to do Before You Start Writing
Well, even before you start writing, there is some homework that you must take care of. As they say, the battle is won even before a single bullet is fired. Here are some things that you need to do:
Research, Research, and More Research
Every single area that your whitepaper needs to cover should be thoroughly researched. You need to pull all the information that you can over the problems that you are about to solve, and how previous attempts at solving them have failed (if applicable). You can use all these articles as citations in your whitepaper later on, which is going to increase your credibility.
You have to remember that whitepapers are all extremely data-focussed. So, in order to fill up the pages, you must have a lot of facts. A good whitepaper is one that has been supported by significant research. Go all out, do not take any half measures.
Read Other White Papers
There is a big chance that somebody else is already working in your topic or subject area already. If that’s the case then have they already released a whitepaper? If yes then you should go through them to see the approach that they are taking to see how you can improve it. Plus, you can also check out the areas where you can really showcase your project’s USP. Also, it is always a good idea to revisit the classics such as the Bitcoin and Ethereum whitepaper.
So, after distilling all your research and creating all the diagrams and graphs, it can be extremely overwhelming to put everything together in one place and. So, you should organize all your information beforehand so it becomes easy to handle and structure alter.
Identify Your Audience
What kind of audience are you aiming for?
Do they belong to a certain age group? Are they located in a particular area? Which fields are they interested in? What kind of people will be attracted to your project?
Once you have an idea of the audience that you will be attracting, you should be able to adapt your language and talk to them in a particular way
How to Structure Your Whitepaper
Alright, so you have done your homework, now it is time to bring everything together and create your own whitepaper. Obviously, we understand that you may not be the best writer, however, we advise you to try and write your own whitepaper. Obviously, you may get lucky and find a great writer who picks up on all the nooks and crannies of your project. However, at the end of the day, nobody knows your product better than you.
There is no set structure to a whitepaper. A company creates a whitepaper which fulfills their needs and approach. At the end of the day, no matter what kind of structure that you are following, a great whitepaper should be able to solve any doubts that a potential investor is having by answering the following questions:
- What is the main aim of this project?
- Does it have a viable business model?
- What are the main problems that this business is going to solve?
- How is it different from its competitors? What is its USP?
- How are they planning to handle their funds?
- Does the project’s token have any real utility?
- Does this project require a blockchain?
- Who are the team members and what is their credibility?
- Is there a working prototype of this project out there or is it just all theoretical right now?
Here are some general sections that a whitepaper should definitely have:
#1 Headline and Abstract
Headline and Abstract barely takes one page together. However, if you don’t nail this part, 90% of your readers are going to leave at once. We don’t need to tell you the importance of a headline. How many times have you opened an email in your inbox purely on the strength of its headline?
A good headline should instantly grab your attention and make you feel intrigued enough to know more. You don’t need to look any further than “Bitcoin: A peer-to-peer electronic cash system”.
An abstract is basically a Tl;Dr version of your project. More often than not, people will read your abstract to know what you have to offer. A good abstract should hook your audience enough to make them want to read your whole white paper.
After the abstract, you have the introduction. Remember that you are still walking on thin ice as of right now. It takes at least 5 pages to get your audience hooked in. Abstract and Introduction combined should be around 2 or 2.5 pages at most.
In the introduction, you must justify why you are creating your project and then briefly gloss over the current economic, political, management etc. climate which supports the need of your project. Basically:
- Why is your project important?
- Why is your project important at this very moment.
Nagricoin does a great job in its introduction:
“During the past seven years, 5 million USD was spent on active research and field tests to gauge Nagri’s effectiveness. Tests were conducted in more than 10 countries, including Brazil, Uruguay, Pakistan, Turkey, Jordan, Italy, Ukraine and the Russian Federation. The research involved large private agricultural holdings, as well as state research centres and laboratories of various countries.
The results of testing showed that Nagri-HL increases the yield of different crops from 10% to 30%, depending on the geographical area of cultivation and on weather conditions. At the same time, an increase in yield was also observed with the addition of Nagri-HL to almost all known combinations of fertilizers and plant protection products.”
They successfully showcased the credibility of the product and also how it can improve one of the backbones of the current age, the agricultural industry.
#3 Problem, Solution, and Product Description
So, after the project has been introduced, you must talk about the problem that you are looking to solve and the solution that you have come up with, i.e. your product. Several projects simply showcase over-designed PDFs throwing around a bunch of problems and solutions without actually getting deep into their product.
Now remember, this is where you hook in your audience once and for all. This is the section that makes or breaks your entire business. Take your time to give a clear, technical explanation of your product and how you are planning to achieve your results. Make liberal use of graphics and diagrams to explain concepts to your readers and to provide visual relief. Hire someone to create infographics for you if you need to. Remember, you have to crush it in this section.
Obviously, there must be specific terms that you need to explain in your whitepaper to help your audience better understand your product. Or maybe there is a process integral to you business which you have to explain to your audience (like how Plasma is integral to OmiseGo). If you haven’t touched those in the intro, then you must touch upon them now.
Throughout this section, you are going to be walking a tightrope. You may be tempted to use a lot of fluffy phrases and jargon terms, however, you should limit their usage. However, at the same time, you must not undersell your product and solution as well. You need to strike that balance and hit the sweet spot. Make sure that you are using an educative tone and not a sales one.
Every single claim that you are making throughout your whitepaper should be backed up credible references.
#3 Token Economics
Next thing that you need to describe properly is the role of your token in your business. The token role should be as clearly defined as possible. The more utility your token has, the more valuable it will be. The reason behind this is two-fold.
Firstly, if you don’t have a clearly defined token, your investors are going to be more or less speculative in nature. They won’t have realistic expectations of your token, and the moment the market drops, they are going to ditch your token and make off.
This isn’t what you should want for your token.
Your token shouldn’t be a placeholder that anyone will swap for BTC or Fiat at the drop of a fly. It should be a proven commodity that people will want to hold on to in their portfolio. Clearly defining the token role will go a long way in doing that.
Because if you don’t, then chances are that your project will lose steam down the line. According to a Deloitte Insights report published in November 2017, Blockchain projects’ failure rate is as high as 92 percent, mostly due to “the lack of actual application scenarios and the quick loss of community members.”
The concept of token velocity is intertwined with why you would want people to hold on to your tokens.
Token velocity is one of the key aspects that affect the future speculative value of the tokens, however not a lot of people truly understand it. If you were to look at Token Velocity as a mathematical formula, it is as follows:
Velocity = Total Transactional Volume / Average Network Value
So, Velocity is directly proportional to the total transactional volume of a coin and is inversely proportional to the average network volume. If you flip this formula around, then you get the following:
Average Network Value = Total Transactional Volume / Velocity.
Meaning, more the token velocity, less the average network volume of the ecosystem.
Alright, so we got a lot of mathematical definitions, however, what does that mean and why are we saying that this could be the ultimate judge of ICO success.
Velocity basically is an indication of how much people respect the project’s tokens.
#4 Token Usage Guidelines
Imagine if you were to invest in an ICO, wouldn’t you want to know exactly how the company will be using your hard-earned money? That is exactly the same respect that you should extend to your investors. The thing is that the modern day investor is extremely savvy. With the sheer amount of scams that have been going on, it makes sense as to why they will be more wary about where their money is going.
As a result, you should have a detailed plan and layout as to how you are going to be spending your money. The investors should be sure that the money is going to build your product instead of facilitating your lifestyle.
Status, who raised more than $100 million in their ICO stated that pretty clearly. Here is a part of what they are planning to do with their funds: “20% of SNT created during the Contribution Period will be allocated to Status Core Dev; the founders and team, over a 24 month vesting period, with a 6 month clif. This means Founder tokens will not be immediately tradable, further aligning the Founders interests with executing upon the long term goals for the project.”
#5 Road Map
Every whitepaper should have a RoadMap which records the key events for the business and their deadlines. The section can be stylized as a chronological diagram that is more visual than text-based.
Why should a RoadMap be given?
- Firstly, it gives a good idea to your investors as to how your project is going to pan out. This was they can have realistic expectations.
- Secondly, it enables constant monitoring of the progress of the project. It will keep the project developers constantly accountable.
At the very least, the RoadMap should have a detailed working plan for the next 12–18 months, which should include the beta-launch.
#6 Team and Advisors
Easily one of the most important part of your whitepaper is the section where you introduce your readers to your team. A well put together team or employees and advisors can go a long way in securing heavy investment.
Let us give you the example of OmiseGO
These are the advisors that they have on-board:
- Vitalik Buterin: The man behind Ethereum
- Dr. Gavin Wood: Ethereum co-founder and founder of Parity
- Joseph Poon: One of the co-creators of the Lightning Network
- Vlad Zamfir: Ethereum co-founder and Casper protocol creator
- Julian Zawistowski: The founder of Golem
- Roger Ver: Owner of Bitcoin.com
Does it surprise you that they were able to raise $25 million in under 24 hours?
The team section is the most important section of any white paper. Period.
As Andrew Chapin, the co-founder of Benja, says, “Every angel investor has a story about investing in a brilliant team with a horrible idea, knowing that they would find pay-dirt after they pivoted out of the original idea. Android was an operating system for cameras before their pivot, Nokia was a wood pulp mill, and Pinterest was a shopping app before it was a social network before it started turning back into a shopping app again.”
You should make sure that you are surrounded by a great team AND you should also make sure that you are showcasing them and their talents properly in your whitepaper. Most ICOs out there don’t even have a proper blockchain engineer on their team! Having no one on your team with significant blockchain experience is a clear sign that the project is not going to go anywhere or, best case scenario, the progress is going to be extremely slow.
How to Design Your Whitepaper
Ok, so now you know how to go about writing your whitepaper, however, the presentation is just as important as well. There are several key areas where you should focus in on. (Huge shoutout to Agentestudio.)
Firstly, the cover page of your whitepaper needs to look sleek, neat, and professional. Nagricoin hits the nail on this one. Not only does their cover look neat, but you also instantly know what they are about.
Images For Explanation and Relief
There should be images throughout your whitepaper which:
- Explains the processes that you are talking about.
- Gives your readers a relief/break from the content
The Bitcoin whitepaper does this by frequently throwing in diagrams to explain how various blockchain mechanisms work.
Monetha uses plenty of graphs in the middle to back their claims:
Jazzing up your Whitepaper
Try to look for other areas where you can add some fun design element without compromising on professionalism. WePower does that brilliantly with their team page. They knew how important and closely scrutinized that page was going to be, so they just made the read more enjoyable but designing it in a cool way.
Common Pitfalls to Avoid
If you are thinking of auditing your ICO whitepaper for a second opinion, then you should do these checks before you send it over. These are some extremely common mistakes that all whitepapers make which you can avoid with a simple check:
- Spelling mistakes: Just don’t make these. They look extremely unprofessional. A simple Grammarly check should be enough.
- All your conclusions and perceptions should be objective and not subjective.
- Over-ambitious goals which are not backed up: Most whitepapers are going to make extremely far-fetched goals without any backing whatsoever. If you are claiming that you are going to do something, then you must at least show how you are going to do it. Actions speaks louder than words.
- Token Dynamics: If your token doesn’t make any sense then you should go back to the drawing board and start reworking your entire model immediately.
- Team: Each and every member of your team should be up to the task. Remember, an interested investor WILL check up on your team members. Make sure that you have no weak links.
- Unrealistic Roadmap: “WE ARE GOING TO BUILD A MULTI-LEVEL BLOCKCHAIN AND SCALE TO MILLIONS OF TRANSACTIONS PER SECONDS IN TWO MONTHS!!” No..you are not.
- Common Formatting Mistakes: Are you using images of different resolutions throughout your whitepaper? If the font and font size not consistent? Do you have an inconsistent layout?
Crypto Whitepaper: Conclusion
Before we conclude, we must say something here. While these guidelines are going to help you, we highly recommend that you start reading other successful ICO whitepapers as much as possible. They will teach you more than anything else. We wish you all the best and hope that you create an absolutely killer whitepaper!