Why investors must understand the White Paper: The evolution from Bitcoin to Ethereum

First read the White Paper, then invest in encryption projects - this is a prerequisite for entering the crypto world.

The White Paper determines the success or failure of your investment

The success of any crypto project primarily depends on the quality of its White Paper. In 2008, Satoshi Nakamoto released “Bitcoin: A Peer-to-Peer Electronic Cash System,” which changed the financial world with just a few pages. This White Paper not only outlined the purpose of Bitcoin—“A purely peer-to-peer version of electronic cash allows online payments to be sent directly from one party to another without going through a financial institution”—but, more importantly, explained how it achieved that.

Similarly, Vitalik Buterin's Ethereum White Paper published in 2013-2014 directly defined the entire DeFi era. His core idea is simple: if Bitcoin is digital cash, then Ethereum is a distributed computer that can run any program. This idea gave rise to a series of ecosystems such as smart contracts, NFTs, and GameFi.

The difference lies here: A good White Paper can tell you what the project is really doing, while a bad White Paper will only cause you to lose money.

What is actually written in the White Paper

A standard White Paper for an encryption project usually includes the following content:

Project Goals and Problem Statement Project founders need to clearly state: What problem are we solving? What are the shortcomings of existing solutions? Why is our solution better? Bitcoin answers “how to decentralize payments”, while Ethereum answers “how to build decentralized applications”.

Technical Implementation Principles This is the key to distinguishing serious projects from money-grabbing projects. The White Paper should detail the consensus mechanism used (such as PoW, PoS, etc.), encryption algorithms, and network architecture. If a White Paper is vague about technical details, caution is warranted.

Tokenomics This includes total supply, initial distribution, unlocking schedule, inflation rate, destruction mechanism, etc. This determines the long-term value of the token. A well-designed tokenomics will encourage participants to contribute value rather than simply speculating.

Team Background and Governance Structure Investors need to know who is operating this project and what their experience is like. Decentralized projects also need to explain the governance model - is it decided by a DAO or led by a core team?

Product Roadmap When is the project planning to achieve what functionality? The White Paper should present a clear development plan rather than an open-ended commitment.

Beware of those white papers that paint a grand vision

During the ICO boom in 2017, thousands of projects emerged, claiming to have “revolutionary ideas”. What was the result? Most projects failed.

The problem is: the threshold for writing a White Paper is too low.

Anyone can describe a seemingly perfect vision with fancy language, but the actual implementation may be far away. So when you read the White Paper, look for three things:

1. Are there excessive commitments — Be cautious if the project claims to solve all problems and change the entire industry.
2. Are the technical details sufficient? — A good White Paper will discuss implementation details in depth, while a poor White Paper only talks about concepts.
3. Does the team have execution ability — Look at what they have done in the past, not what they say they will do.

How the White Paper Guides Your Investment Decisions

Track the fulfillment of project commitments With the White Paper, you have a benchmark. You can regularly check: Is the project progressing according to the roadmap? Is the token distribution consistent with the plan? Is the team actually working or just talking nonsense on social media?

Assess Long-term Value The encryption market is full of short-term speculation, but the White Paper allows you to see the true value proposition of a project. A good White Paper will help you understand: why this project exists, why this blockchain is needed, and why this coin has value.

Reduce the risk of being cut During the ICO boom in 2017 and the subsequent waves of various “new concepts”, the White Paper is your shield. Carefully studying the White Paper and comparing the project's claims with actual progress can help you avoid at least 70% of the junk projects.

The format of the White Paper does not have a unified standard, but that is not an excuse.

There is no “official” White Paper template. Some projects have a White Paper that is only 5 pages long, while others can be as long as 50 pages. But this does not mean that there are no quality standards.

A good White Paper should have:

• Objective, information-dense, rather than filled with exaggeration
• Present the project's vision and technical reality in a balanced manner.
• Clear logical chain: Problem → Solution → Implementation method → Token model

A poor White Paper will:

• Use overly committed language that promises far beyond one's capabilities.
• Technical details are unclear.
• Over-packaging, underestimating substance

Learn How to Read a White Paper from Bitcoin and Ethereum

Highlights of the Bitcoin White Paper: Concise and powerful. Satoshi Nakamoto clearly addressed the most critical issue—how to solve the “double spending problem” using a distributed network—in the fewest words possible. He also explained in detail how the proof of work (PoW) mechanism protects network security. Every page is packed with valuable information.

Highlights of the Ethereum White Paper: The balance between ambition and feasibility. Vitalik not only painted a vision for a general-purpose computing platform but also proposed specific technical solutions such as smart contracts and virtual machines. He even candidly discussed limitations and trade-offs in the White Paper.

Commonalities: Both focus on core issues, both provide technical details, and neither makes excessive promises.

How Investors Should Use the White Paper

1. First read the executive summary — Quickly understand the core of the project
2. In-depth study of the tokenomics chapter — This relates to the long-term value of the coin.
3. Check the Technical Implementation Section — Determine whether the project truly has the capability to deliver.
4. Compare the White Paper with Actual Progress — Check every six months to see if the project is being executed.
5. Consult multiple opinions — Don't just read the official White Paper, also look at community evaluations and technical analyses.

Final Recommendations

The White Paper is the first door to enter any encryption project. It reflects the rigor of the project team, technical level, and honesty. A well-written, content-rich White Paper usually indicates a reliable project. Conversely, the opposite is also true.

In the 2024 crypto market, shoddy projects are still emerging one after another. But if you develop the habit of reading White Papers and learn to discern the gap between promises and reality, you have already surpassed most retail investors. Starting with the White Papers of Bitcoin and Ethereum, you will find that projects that truly change finance often make their intentions clear from the very beginning.