With the ever increasing interest in ICO projects, many startups from all around the world are trying to raise money by launching ICOs. ICO is a type of crowd funding or crowd investing tool conducted based on blockchain technology. Initially, the main idea of an ICO was to fund new projects by pre-selling coins or tokens to investors interested in the project. Entrepreneurs present a whitepaper describing the business model and the technical specifications of a project before the ICO.
Essentially, an ICO whitepaper entails a timeline for the project and set a target budget where they describe the future funds spending, as well as token distribution. During the crowdfunding campaign, investors purchase tokens with well-established cryptocurrencies like Bitcoin and Ethereum.
Having this said, it is of paramount importance for projects developers to deliver a comprehensive and robust ICO whitepaper to the public, as this is one of the first publicity materials that meets the eye of the investors, and will undoubtedly affect the investors’ investment decisions in the project. In this article, we would probe into the factors that mould a good ICO white paper.
What is a White Paper?
The white paper is a document that figures the technology of an ICO project. It usually contains a detailed description of the system architecture and its interaction with users, and it also features a technical overview of the product. In addition, it features an introduction of the company as well as the aims and vision of the project, and a list of project team members, investors and advisors.
By reading the whitepaper, potential investors will have an overview on the ICO project, and hence will decide whether or not to invest in the project. Without a comprehensive and robust whitepaper, it would be difficult for a project team to perform a successful ICO procedure, as people are reluctant to invest in a project which lacks information and details, with a poorly built technology infrastructure and an inexperienced team.
What should a white paper look like?
According to Andrew Chapin, blockchain expert and co-founder of Benja, the merchandise ad network, which recently announced the benjaCoin, wrote in a Hacker Noon column that a good white paper should include the following sections:
- Solution & Product
- Token Implementation (how the token works with the product, economics and technical)
- Token Deployment & Plan
Noteworthy is the fact that the team section is universally the most important section of any white paper, although it is often placed at the end of the white paper.
According to Chapin, any investor-angel can tell stories about investing in a strong team with a horrible idea, because he or she believed in their abilities of creating a valuable product in the course of their activity. For example, before its pivot, Android used to be a camera operating system. Nokia dealt with woodworking and paper production before and Pinterest, at the very start of its career, used to be a shopping app and it wasn’t a social network despite recently returning to its e-Commerce origins.
As a matter of fact, the qualities of the ICO projects are very diverse, for some lower quality projects, some raise funds without a blockchain engineer on board, thinking that they will raise enough money to find one when they need to, albeit without having a roubst vision of what the project wants to achieve. In reality, engineers with experience in this area are harder to find than one might think, and with the kind of money that organizations with freshly-minted ICOs can afford to pay, hiring specialists is about to take up the biggest share of a project’s expense.
Notwithstanding the above, it is crucial that the team should be multi-professional, and should already have had some experience in blockchain related industries. It is not uncommon for developers in China, and all around the world to launch ICO projects even when they do not have competent engineers to deal with the blockchain technology. Instead, the developers consider fund-raising to be the most important goal and they are over-confident that they can employ an engineer later on. However, before investors are eager to donate money to the project, they need to be convinced that the team is able to create what they had planned. With a lousy and unorganized ICO whitepaper, it is difficult to convince investors to invest in the project.
Production description and technicalities play an indispensible part of the ICO white paper. In general, the product description part of an ICO whitepaper should include prototype data, first users and development strategies. Usually, during the pre-ICO stage, project developers only have a flawless theoretical model and a few mock-ups. Yet, they have no actual product, its potential users and development strategy. If the project already has a solid infrastructure and users, it increases the chances of token survival and price stability of the market. These elements must therefore be presented in the white paper.
A detailed and convincing plan of the use of funds raised is essential. For ICO projects in China, there are many project developers who mention about industrial consortias, non-profit units or events related to industry development. This may raise suspicions that a member of the team intends to spend money not only on product development but to satisfy his or her personal wants.
Furthermore, the information on tokens is detailed during its offer at the stock exchange. If it is not introduced, or if the whitepaper states that this will follow in the following one or two months, it may hinder the trust of investors on their projects. This hints that it is highly probable for the project team to manipulate the price of a token at the moment of a free trade opening, which is a common malpractice for low quality ICO projects. In general, the public is interested in the future cooperation and prospects of the company with issued tokens. In light of this, one needs to address some of the following questions, to name but just a few: Will the issue be limited before the pre-sale? When will sales start on the market? Will redemption be operated? What are the details of airdrops? With these questions answered, it boosts the confidence of investors, ultimately paving way to the success of one’s ICO project.
Last but not least, the white paper should also include a detailed technical description of the project and its future development plans and roadmaps. In theory, the team should present a detailed working plan for the next one to two years, which should cover the beta-launch. If some tasks of the roadmap have already been performed, it would be a plus for the project developer.
In this post, we have probed into the elements that constitutes a good whitepaper, which is of paramount importance for investors to know about an ICO project. Please contact us if you need any ICO whitepaper related services.