It would be foolish to deny the essential role of white paper in the development of the cryptocurrency industry, given at least the fact that it was initiated by Satoshi Nakamoto's nine-page document .
White paper Nakamoto created the basis for the innovative and decentralized Bitcoin payment network and the underlying blockchain technology , as well as for more than 2,000 altcoins, whose capitalization today is $ 128 billion.
White paper in cryptoindustry is considered an effective marketing tool. He explains the meaning of the project for potential users and helps to attract investors.
At the very beginning, the bitcoin or ethereum blockchains were public, so it made sense to make information about them publicly available, and white paper was ideally suited for that. White paper also helped investors find out if the project was not a fraud – fake data of team members or plagiarism could serve as obvious signs of this.
“A detailed written explanation of what the project is trying to create and what the token is better than the traditional infrastructure will almost always be the first that anyone who wants to conduct a more detailed study of the project and its merits will meet ,” said Preston Byrne, partner of Byrne & Storm.
But not all cryptocurrencies have official documents – many old coins, such as lightcoin , were launched with a simple description of the project on the Bitcointalk forum in order to get support from miners , but later white paper became an indispensable attribute of each project due to the rapidly growing ICO market. For example, in 2017, the Brave web browser project collected about $ 35 million in less than 30 seconds.
Today, ICO market activity has decreased. According to the CoinGecko report , in 2018, the number of ICOs that managed to collect the stated amount of investments decreased from 53% in January 2018 to 10% in December of the same year.
The negative attitude of financial regulators to the ICO market made it difficult to raise capital through. Today, many are seeking to raise funds through the offer of a token – a security (STO) , although no jurisdiction has legalized this procedure, and there are still no exchanges in the market that are focused on working with Security tokens .
“White paper allows the community to analyze the concept in detail. During the ICO boom, these documents moved from a technically complex document to a white paper business plan, ” says Bobby Ong, co-founder of CoinGecko, adding:
“Since many of these ICOs do not have a work product, it is difficult to determine which projects deserve support. For many investors, the concept and quality of writing white paper serves as an indicator of the quality of the team behind the project, and becomes an indicator for the possibility of investing. ”
Deviation from the original
It is not uncommon for a company to change its core business, but for companies in the cryptocurrency and blockchain industries, deviations from the original white paper can be problematic for many reasons.
The lack of regulation in the industry, as well as the fact that many projects do not have a track record, leads to the fact that any unexpected actions of the company may cause investors concern.
Kevin Hobbs, CEO of Vanbex, believes white paper is a double-edged sword. They are necessary to attract investors, but, on the other hand, they can damage the ecosystem, since they are often not fully respected.
"This leads to a possible disappointment and lack of confidence among investors in cryptocurrency," Hobbs added.
Deviation, however, does not always indicate unfavorable intentions. Many projects can promise anything, but in the end it becomes obvious that they overestimated their capabilities or underestimated the real market conditions.
In other cases, companies have to deviate from their white paper to correct a mistakenly accepted approach to product creation. In the worst case, companies are moving away from their original intentions due to poor financial management.
“Most ICOs raised funds on the air, and many did not convert investment assets into Fiat or slabcoins. Since the price of the broadcast has fallen by almost 90% from its peak, many of these projects have significantly reduced their staff and now they do not have enough money to produce the product they promised in white paper , ”says Hobbs.
“By identifying themselves with their white paper companies limit themselves ,” says David Williams of Blockrules.
“Successful companies are not just technology. What makes a company successful is not a beautiful theory, but how they implement their idea. ”
Future white paper
It is quite possible that in the future blockchain projects will use a more traditional business approach, bypassing white paper and instead of it will be a regular business plan. This may signal market maturity, but raises an important question about the role of these documents in the industry.
“White paper of Bitcoin served to describe the technical vision of cryptocurrency, and serious projects still write them. But during the ICO boom in 2017-2018, many projects changed the very concept of white paper, which became more like a business plan. In addition, because of the large number of ICOs, their quality varies greatly , ”says Ong.
Tomer Sofinzon, founder and director of business development at the Pillar Project, notes that although white paper was a critical component for open systems such as the blockchain and cryptocurrency, "they also became the main tool for fraudsters and easy money lovers who were not really responsible in front of their investors and promised products that had no connection with reality. "
Complicated high-tech projects are often found in the industry, and it is here that white paper is most useful because it helps bring the main goal of the project, but in practice this technical difficulty is confused by potential investors, which is often the reason for the success of fraudulent schemes.
The question is not whether white paper will continue to play a decisive role in the industry, but whether the industry will mature for professionally prepared proposals. In addition, as Ong rightly pointed out, the future of white paper will depend on how the ICO and STO markets develop. If the first wins, we will most likely see the continuation of the emergence of new white paper in the industry.
Publication date 26.02.2019
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