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Reviewing an ICO through Its Whitepaper

Anyone who has experience investing in ICOs, would most likely have read through a whitepaper before. The whitepaper is considered to be one of the most essential sources of information on the project as the majority of the project’s information is found there. 

The content of the whitepaper may not have a fixed list of information to be put in but it is generally split into two kinds of information: general project information and technical information. General information usually covers the history of the company, problem statement and solution. Technical information mainly focuses on the blockchain side of things such as tokenomics and token specifications. 

Going through an entire whitepaper may not be the most efficient way of assessing the project, instead focusing on the factors as indications. Some factors you should take special attention towards are:

  • History of the company

Study how the company have the experience and expertise in the particular line of business and technology related to the project. It is also important to understand the different level of risk you’re taking when the company is a start-up or has been funded by a venture capitalist. Another factor to take note of would be how long the company has been around and the expertise of their team. 

  • Project details 

Information about how the raised funds will be used in the different needs of the company is a good indicator of a sound strategy. A rare but affirming factor would be having an approval from a regulatory organisation. The first step to making an assessment of the project would be having a good understanding of the project. 

  • How Blockchain is utilised in the project

It is important to understand what the project is trying to fix using blockchain and whether there is a need for blockchain. In the current market situation where differences between projects are blurred, it is essential for projects to be clear and concise. How will blockchain help solve this problem? Whether it is scaling a business or proposing a new business model only possible with blockchain. 

  • Token type

An important consideration would be the legality of the token, currently majority of cryptocurrencies are issued as utility tokens. A big red flag to take note of is a project issuing security tokens but do not have any regulatory indications in the whitepaper. 

Aside from the type of token, you have to also consider the different token standards. Majority of current tokens are using ERC20 token standard, which popularise the usage of smart contracts. The token standard will affect what exchanges and wallets will support the project’s tokens. 

  • Timeline

Looking at the timeline of the project may not have a direct indication of a good project, but it will give you a heads up on the length of commitment required on your end. A telling sign of a poorly planned project will be disproportionate time allocated to the various tasks of the project. 

In conclusion, whitepapers may comprise plenty of detailed information, but it is important to focus on the details that matter, especially when doing a first assessment of the project which should not take up too much time. 

Written by Nares Laopannarai
Edited by Jordan Ng

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