Initial Coin Offering (ICO) is, without a doubt, the most innovative raise funds. Its popularity is on the rise, as, according to Fundera:
- A total of 3,782 ICOs were opened last year
- The finance industry has the biggest number of opened ICOs – 644 in 2018
- Completed ICOs raised almost $7 billion last year
Initial Coin Offering often involves a statutory documents called an ICO white paper, which is a sort of a guide for the investors. Besides, as ICO is also a high-risk mechanism, providing investors with extensive information on an ICO is a must.
A Closer Look at The ICO White Paper
What is an ICO White Paper?
A white paper is a document, which includes an outline and a solution to a problem that a certain fundraising program is designed to solve. It is an authoritative guide for potential investors that clearly states:
- the aim of the ICO
- potential risks
- solutions to overcome these risks
- the outcome of the ICO
You can think of an ICO white paper as a marketing presentation, in which you persuade the investors that they are making the right decision by investing in your venture. It is also important to note, that no ICO should be released without a white paper in addition to it.
The Stages of ICO White Paper Preparation
ICO deals with cryptocurrencies and blockchain technology, a white paper should describe in detail how cryptocurrencies and blockchain technology will be utilized to solve a certain problem, stated by the ICO.
Like with any other white paper, there are three stages that precede the final version of the ICO white paper:
- A green paper – a draft or a proposal
- A blue paper – a more advanced variant, than a green paper, with technical specifications and ICO applications described in detail
- A yellow paper – a preprint version of the white paper – contains the above-mentioned characteristics, as well as additional research to support the ICO.
These three stages are important for the ICO white
The Aim of the ICO White Paper
As stated by a recent ICO white paper study, the necessity for the ICO white paper is conditioned by the fact that potential investors need as much detail as possible to make the informed decision.
Thus, an ICO white paper is created to give investors a full scope of information and help them make a well-informed decision. This decision should be based solely on the facts, presented in the white paper.
How to Write an ICO White Paper?
Before you proceed with writing an ICO white paper, it is important to keep in mind that:
- an ICO white paper shouldn’t contain any advertising messages, as it may mislead an investor into making a wrong decision
- although you may think of an ICO white paper as a marketing tool, you shouldn’t treat it as a marketing mechanism (as it primarily has an informative function only)
- as an ICO white paper should contain factual information
Since an ICO white paper is used as a formal guide to an ICO mechanism, it should be written in a formal language and resemble academic articles. It is important to keep these features of an ICO white paper in mind before proceeding with writing.
Now, let’s dive into the preparatory and the writing part of creating an ICO white paper.
- Outlining the Structure of an ICO White Paper
The structure of a white paper is characteristic of that of an academic paper. The outline of an ICO white paper consists of:
- An introduction, which consists of a statement of the problem, a brief description of the problem as well as of the current situation on the market.
Introductions to the ICO white papers can contain additional information, necessary for the investors to understand the problem in its full scope. For instance, the introduction to Ethereum’s ICO white paper contains information on the history of cryptocurrency, the description of bitcoin, information on mining, alternative blockchain applications, etc.
Introduction also must include the description of basic concepts, definitions, and the algorithm of application.
- The presentation of the proposed idea and technical details of its implementation. In its turn, this part of the ICO white paper consists of a description of token commercialization. This part should offer detailed insights on how the end product will interact with the economy, as well as describe the technical provision regarding commercialization.
- Statement of the problem. This part lists possible issues that may occur during the implementation of the idea and solutions to them. Here, you must also do a budget breakdown and a step-by-step explanation of how the money will be used. This is necessary to reassure the investors that your project is not a scam.
- Project application. Here, provide the investors with details on how your idea will be implemented, and its potential application in different areas. This part is necessary to help understand the practical application of the product and its competitiveness.
To support your claims, add a section on market analysis, a description of other similar projects, and how yours is different from your competitors.
- Conclusion – a brief sum-up of the points, mentioned earlier.
Following this outline will help you create a comprehensive white paper that delivers clear information, understandable for all cryptocurrency investors.
Part 2 will be released tomorrow. Stay tuned with CryptoDaily for more!
Author: Nicole Garrison