With new projects coming out what seems like every day, it can appear like the streets are paved with gold, but the truth is not all projects are a good investment. As blockchain's popularity grows and its applications explode, with no signs of slowing down, it's essential to understand what a white paper is and how to read it.
This blog looks at six steps on how to read a white paper.
A Step-by-Step Guide on How to Read a White Paper:
1. Know the Project's 'Why."
White papers can get pretty technical at times. As a cross between an academic paper and a business proposal, there can be a lot of information to absorb. When reading any white paper, the key is always looking for the project's ultimate purpose or goal.
What problem is it trying to solve, what situation is it trying to improve, and how is this proposal different? Understanding this is vital.
2. Ask yourself if this idea is helpful
The real-world application of any project is the next factor to consider seriously, whether this sounds like a fairy tale or a viable option worth pursuing. There are a ton of cryptocurrencies currently on the open market, each with its unique take and spin on what they can do, but the truth is that not all of them are useful.
3. Achieving consensus in the network
Achieving consensus in the blockchain world means verifying if a transaction is genuine. The network either gives a thumbs up or down, depending on whether the information matches what is on file.
Achieving consensus is a critical element that legitimizes blockchain and ensures all users trust the system. As the foundation of all decentralized technology, this is an essential point. When assessing a white paper, it's crucial to understand how this process works, even at a basic level.
4. Distribution Process of Coins
Make sure it's clear how the distribution of coins works and that everything is clear and precise. Most crypto projects have some initial release for their coin distribution, especially in cases of proof-of-stake projects.
A red flag is if the coin offering is only for venture capitalists and project developers; this is likely a sign of a pump-and-dump scheme.
5. Double-check the More Technical Aspects
Ideas can get quite complex quickly, as with most things in the tech world. Take your time with this process; take the time to read every footnote and bullet point. Consider this and review all specifics with a fine-tooth comb, leaving nothing to chance.
6. Project Schedule
Lastly, be clear on when this project will roll out and be officially live, whether in weeks or months. Understand all details, from the release date, how token exchange works, and anything else that comes to mind; it never hurts to ask questions.
Hungry for more? Join me each week, where I'll break down complex topics and dissect the latest news within the cybersecurity industry and blockchain ecosystem, simplifying the world of tech.