In this short article, I will explain how to look for a cryptocurrency project by consulting the whitepaper. In addition to making sure you invest in a solid project, researching a white paper can also help you avoid scams.
What is a white paper?
If a company wishes to introduce a new cryptocurrency, it usually exposes all the details in a technical document known as White Paper. This file contains technical, financial and commercial information related to the project. In general, it clearly establishes what it intends to build to attract investors and other interested parties. In other words, the document explains the purpose and process of the project, why and how.
Some projects do not start by publishing a white paper. Loom Network decided not to write a technical document, but immediately began to develop and deliver the code.
Litecoin began a video presentation on the creation of a litecoin in a Coinbase event. And others are just references to existing projects, such as Bitcoin, so they do not have their own technical document. Some projects produce purple, green or yellow paper or, like Cardano, several white papers that describe each part of the technology that is being developed. Fortunately, almost all cryptographic currencies and ICOs continue to publish a technical document in their roadmap to describe their project and technology. So, if you plan to invest in a new currency or an ICO and you also want to avoid scams, your first step is to read the document.
What should you look for in a white paper?
Technology: The most important is the proposed (technical) solution of the project for a real problem, for a sufficiently important relevant market. It does not matter if it is new or better to use existing technologies. If the problem you are trying to solve does not have to be solved, there is a great chance that the project will fail or be saved quickly. It should not be a “decentralized” solution to a problem that has already been solved “centrally” without resorting to blockchain or cryptocurrency.
Fraud alert: Look for common buzz words that only serve to confuse you without really explaining what the project is about.
Team: the people behind the project are fundamental to success. Look closely at the team and its advisors. What are your previous experiences? What is your education? Are you involved in more projects? Ask questions in case of doubt.
Fraud warning: surf the Internet and linkedin for team members and make sure it’s the real deal. Remember to search your images on Google, if there are any, to see if they are real. Fitrova, a scam project on leaving the association, boasted excellent partnerships, but after consulting these partners, they even denied knowing the CEO. Declouds, also a con man, wanted to prove his alleged association with a bank by photographing himself in a photo of the members of the board of directors of this bank. Another project, during his ICO, was invoked by stolen user interface images and photos of his alleged team members who, in fact, had stolen images of high school teachers in Australia.
Roadmap: Technical development takes longer than expected, but a roadmap gives you an idea if you are realistic about your goals. If the Mainnet network will be delivered in a year or more, this could be a riskier investment, since the cryptographic environment is changing rapidly and other (similar) projects are emerging.
Fraud Warning: If the roadmap says that an important network will be delivered in a few months, it would be great, but it could also mean that you are trying to make money quickly (unless the development starts earlier). the ICO of Cource).
Token allocation: the elements to consider are the amount of chips they will bring. Are the tokens blocked for team members? Will they burn chips without selling? Can you bring extra chips if you decide to do it? Or do they gradually release new chips at fixed times? Is there an inflation rate? What is the consensus mechanism? All these factors must be taken into account when making an investment. In general, the best assignment of tokens for investors is represented by projects with a low chip offer. So you get a bigger piece of the cake when you
The rest: Many other things in a technical paper could be a deciding factor for smart investors. What are the short and long term holders of the balls? What role do the chips play in the project? You can use tokens for a particular product or are they stock of a company? Are there many more private investors who influence the team, or are the chips distributed to many small investors? What is your marketing strategy?
Scam Warning: There are so many things that could be red flags. Make sure you check the information on their websites and social networks that you see, or use only blank words, fake testimonials, and social network robots? Are there any questionable statements? By declaring that the SEC complies with the UCI, while the SEC does not give prior approval to the OIC, or with such agreements or disputes, to large partners without a name. For example, IOTA (which was not a scam) asked to partner with Microsoft, which actually was a subscription to office 365. Note claims that their product can be used in any shop or with individual banks. Be careful with Ponzi systems like Bitconnect, the promised investment benefits to keep their currency. Sometimes they swell with big whales that have already invested. Always check the meaning of the post and try to find these great whales to make sure that the team does not claim that the investors have already landed.
In the end, after reading the whitepaper, you should feel a sense of emotion. You must have confidence in the why and how of the project and the team. You want to put your money in the hands of a reliable project with a clear path. Many projects that turned out to be frauds, at first glance, had a legitimate technical document. But after taking a closer look at the promises made in the document, how they are set up and who wants to make it a success, investors should be able to choose red flags. Of course, there are many other factors that may lead to the conclusion that the project is a sound investment, but the examination of the technical paper is one of the most accessible forms for you.
Luckily, www.allcryptowhitepapers.com has the database of the world’s largest white papers. With almost 1700 projects in our database, it is the best place to start your search. Than, or do not forget to visit the White Paper Weekly and News section, so do not miss anything. Knowledge is power!
Written By: Aborisade Glory
Edited By: Azeez Stephen
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