How to Read a White Paper

There is no set standard to what a white paper should include but that does not mean a person cannot use a white paper to assess the quality of a project. A higher level project may use a white paper to simply outline the technology they offer. If the questions below are not answered, find them else where. This goes for any project. If there are unanswered questions after reading a white paper, research the answers. However, there is value in a well written white paper. The information presented in a white paper can be a good judge of capabilities and integrity of the project in question. 

1. What is the goal of the project?

A white paper needs a clearly defined goal. This goal can vary in scope. The purpose of asking this question is to assess how well the project understands what they are building. A poorly defined purpose or goal in a white paper does not necessarily mean the project does not understand the goal but it is reason enough to have some doubt and more questions.

 2. Does the goal represent a demand in the market?

Like businesses, projects will not succeed if no one finds any use for them. Look for a hole in the market that the project’s idea can fill. The gap in the market could be something you may not understand. Many people still do not understand the use of Web3 or crypto. And sure enough there is no need for some of these crypto projects. Fully understand the purpose of the project and the market in which it looks to enter. If you do your research and the project doesn’t seem to have any real purpose, then why would you invest?

3. How will this project supply this demand?

Sort of like a business plan, a good white paper will outline the major developments they will have that push it towards success. Many projects will also have a Road Map that illustrates their development journey. This may have time estimations. Development, and code development especially, can often take longer than proposed and having dates is not even necessary. The important thing is that there is a plan. From there, the plan has to make sense.

4. Is the project team capable of supplying this demand?

Ultimately you want to see the team and their backgrounds in the white paper. Experience and previous successes can go a long way in demonstrating a teams capabilities. If this information is not present, you have to look at the information available. Assess the scope of the project and the amount of people on the team. Look at the information you found in the previous question and list out what the project is doing right and what the project is doing wrong. And remember, just because a project can offer a solution, doesn’t mean it can execute its implementation. Look back at question 2 and make a judgment on the capabilities of the project to execute what you found in question 3.

5. Is the project sustainable?

This question generally comes down to use of project resources. Does the projects plan incorporate using their resources in a way that brings in more resources. Generally this comes down to funding. Is the expenditure of funds going to bring in more money than was spent? Also, possibly, does the demand of what the project offers match the money or effort they are going to put into it? If the project wants $1 million dollars for a $500,000 piece of the market, is it sustainable? If The project is going to use investors money for development and marketing with no grasp on how to bring in customers, is it sustainable? Take what you gathered from the previous question and think about progress in 6 months from now, in 1 year from now, in 10 years from now and beyond.

6. What relationship does this project have with crypto?

The term crypto in this question includes all things blockchain, Web3, and/or NFT based. If the project is using this technology to raise funds, then what is the project doing for crypto technology and/or the crypto space? A project doesn’t necessarily have to evolve crypto to be a crypto project. The important thing to look at is why the project is using crypto instead of fiat. Starting a project without something to offer crypto users could be a red flag. If the project wouldn’t survive without crypto, what will make it survive because of crypto? Usually, the purpose of a project should fill a demand of the people who use crypto.

7. Does this project actually benefit from being blockchain based?

In the previous question we assessed what the project offers crypto. For this question, look at what the blockchain offers the project. This question is more for newer and smaller projects. Not all new and small projects are bad. Everyone has to start somewhere. Additionally, there are two sides to this. If the project doesn’t benefit from being blockchain based, then it should demonstrate how it will benefit people who do not use crypto and have a plan to reach those people. On the opposite end, many people are simply capitalizing on the crypto trend and NFT culture. So while some projects may not be benefitting from being a crypto project, some projects are simply existing because they are a crypto project. Exercise caution with either.

8. What is the likelihood this project will succeed?

Part of this question relates to what you want out of the project, how long you want to hold, and what your profit goals are. In that measure, your success is tied the project’s success and what you consider is a successful project is part of that. Sticking strictly to the question of the likelihood that the project succeeds, make your best assessment, but definitely ask the question. Come up with a percentage of what you think is the chance the project will succeed. Maybe you’re risk adverse or maybe you exercise risk versus reward. Whatever your strategy is, look at the likelihood you will get what you want out of the project.

9. How safe are your funds in this project?

Aside from the risk of a failed project, is there anything else in the white paper, or not in the white paper, that leads you to believe your funds are not safe? Is this project a scam? Even if the team is doxxed and KYC’d, real or fake, it is still possible to steal your money. What has the project offered you to demonstrate it is not a scam? Are there any safeguards in place to protect your money?

10. Is anything missing or self-conflicting?

Before diving head first into a project, look at the white paper, and all project information available for that matter, and see if anything is missing or contradictory. If you have more questions, find the answers. Ask the project if you must. Also, look for items that conflict. As an example, if the project claims to be about its users and community and there is a tax going to the team, figure out why there is that tax and how it will be used. Missing or contradictory information can be a sign of a poorly planned project, or worse, a scam.

A Project is More than A White Paper Please remember that nothing from anyone or anything on Zentaurios is financial advice and should not be taken as such. You must always do your own research. Do not stop with the white paper. Read everything you can find about the project. Join their socials, listen to AMA’s, talk to the project, talk to the community, and talk about the project with people you know. As much as a poorly outlined white paper can be a red flag, a scammer could create a well designed white paper to appear honest. To make your best decision, always exercise due diligence and get your questions answered.

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