What is a Cryptocurrency?
The History of Cryptocurrencies
How are Cryptocurrencies Valued?
Do I have to buy a whole Bitcoin?
Is Bitcoin legal?
Write Everything Down
Do Not Store Cryptocurrencies on Exchanges
Enable Two Factor Authentication
How to Receive an Airdrop?
What are the Benefits of Airdrops?
Is there a Catch to Receiving an Airdrop?
What Should an Investor do upon Receiving an Airdrop?
Why Burn Cryptocurrencies?
ICO Token Burn
What is Proof of Burn?
The whitepaper is the core foundation of an ICO and it is not unusual for a company to present little else than a single document before initiating their ICO. In this segment we will examine whitepaper in detail, how to best analyze one to get as much information out of it as possible, and how to write one.
By definition, a whitepaper is an authoritative guide informing readers about complex issues and presenting an idea about how to resolve the matter. Whitepapers are created to help readers understand an issue, resolve a problem or make a decision. Within a business context whitepapers are generally similar to a marketing presentation in that they are a tool designed to persuade investors or customers of the viewpoint of the writer.
In regard to crytocurrencies and ICOs within the blockchain space, a whitepaper is a document that details what problem the project is aiming to address and how it intends to utilise blockchain technology to do so. The document will usually contain the following:
- A problem and detailed solution that the project is providing.
- A detailed description of the product and the system architecture upon which it is built.
- Details of the team behind the idea.
- Comprehensive information on the ICO: how much funding will be raised, the roadmap etc.
The potential and perspective of the token, how it will distributed if the ICO is successful. The language used in whitepapers can sometimes be highly technical, however it is important not to be put off by this and dedicate a sufficient amount of time to analysing the project. When examining an ICOs whitepaper there are a few key questions a potential investor should ask:
The Use Case
- Is there a real use case?
- Is this a large problem or issue that a lot of people have?
- Is the project solving it with a unique solution?
- What does the competitor landscape look like inside and outside of digital assets?
- Is using blockchain technology necessary to solve the problem?
- Is the timeline realistic?
- Does it accomodate for the expected delays that come with developing a software?
- How will the funds be distributed in developing the project?
- Is the value of the project realistic?
- How many tokens are being released?
- How many does the team keep for itself? Is the balance acceptable?
- How large is the supply of tokens?
- When will the token be released?
- Will the token have value?
- When will it be tradeable on exchanges?
- Who does the team behind the ICO consist of?
- Who are the advisors on the project? What are their track records like? Do they really support it across their social channels?
- Does their track record suggest that they capable of delivering on their ambitions?
- Do they have any prior blockchain experience?
- Have any established companies expressed a firm interest in working with the project once the product is released?
- Can these claims be proven to be true?
- Rocket Chat
To summarise, the whitepaper is the focal and most important aspect of any ICO and as a potential investor it is absolutely paramount to read it carefully and arrive at an informed decision before investing. There are several key factors to consider, such as the product, the team and the roadmap of the product development. However, if analysed properly, the whitepaper in combination with external research can help minimise the risk of ill-judged investments.
KYC (Know Your Customer)
- Date of birth.
- Country of residency.
- Public address from where investments will be sent.
- Intended investment amount.
- Links to social media accounts.
- A photo of identification such as a passport or driving license.
- A photo of the investor holding up that same ID.
- A photo of a recent bill with the investors address on it.
After carrying out lengthy research, reading the whitepaper, being confirmed on the whitelist and completing any necessary KYC, an investor is ready to participate in an ICO. In this segment we will detail the steps required do so, as well as some of the risks associated and ways to prevent potential pitfalls.
Does the ICO set a realistic market cap?
The most popular ICOs sell out in matters of seconds and therefore it is important to be prepared the moment an ICO goes live, whilst also taking into consideration other factors such as the speed of the transactions you send. Whether participation is successful is dependent on how fast the ICO receives an investment. Should the transaction not be accepted in time, it will be returned to the address that sent it. How the speed is determined varies, depending on the cryptocurrency that is being sent and the wallet sending it. It cannot be changed in the case of all currencies. It is recommended to research this extensively to avoid missing out on an ICO.
The act of participating in an ICO is relatively simple and consists of sending an investment to the public address defined once the ICO goes live and receiving tokens in return.
Should I run an ICO?
Writing an ICO whitepaper
- The problem.
- A proposed solution (using blockchain technology).
- How the concept behind the ICO will implement the solution.
- How the token is going to be valued, distributed and interact within the ecosystem.
- The concept roadmap.
- The team behind the concept.
Building an ICO team
Other best practises
- Set up a foundation in a cryptocurrency friendly location. For example, the Lisk Foundation is based in Zug, Switzerland.
- Set up social channels so investors can reach out to you. Telegram, Reddit and Twitter are among the most popular channels used in the space.
- Always communicate consistently and professionally. Investors, especially in the cryptocurrency space, are very active with their communication. It is very important to respond in kind.
- Do not hype the price of your token. Let the product speak for itself.
- Always prioritise investor security.