How to Read and Understand a Cryptocurrency Whitepaper

How to Read and Understand a Cryptocurrency Whitepaper

Virtually every crypto project that hits the market has some sort of whitepaper attached to it. As you’ll probably know, a crypto whitepaper, at its core, tells investors and the general public what the project is all about. It explores the underlying blockchain technology, its tokenomics, its roadmap, and much more. Crypto investors are always encouraged to read a project’s whitepaper before investing in it but this is easier said than done.

 

Whitepapers can be very long and have a lot of technical jargon that can make them hard to understand. If you’re struggling with reading a crypto whitepaper, consider the following tips:

  • Read Section-By-Section

One of the worst things you can do when trying to read and understand a crypto whitepaper, especially as a newbie, is to read it all at once. Whitepapers can be thousands of words and trying to digest it all a once can be a hassle. 

So, pace yourself and try to go through one section at a time. Read the whitepaper summary and table of contents to decide where you want to start. You might even decide not to read every section but the few that are most relevant to you. By taking your time, you’re more likely to have an in-depth understanding of the document.

  • Look For Dates

When you’re considering getting involved in any crypto project, you need to know the important dates attached to it. For example, the project might be hosting a presale, which is your chance to get tokens at a cheaper price. However, these presales tend to sell out due to high demand. As Alan Draper says, top crypto presales can raise millions in a short time, so you don’t want to get left behind. 

 

So, when looking at a crypto whitepaper, head to its roadmap and take note of key dates such as presales, token listing, airdrops, and much more. This will give you an idea of where the project is going and ways that you can get involved. 

  • Break Down the Consensus 

Before you get involved in any crypto project, you need to know what type of consensus it runs on. A project being based on a proof-of-work or proof-of-stake consensus dictates how it impacts the environment, how new tokens can be acquired, its security, and whatnot. As a rule, search for the section of the whitepaper that talks about the native blockchain and the technological foundation of the crypto and be certain what consensus it uses.

  • Search Terms 

As you read a whitepaper, it is inevitable that you’ll come across certain terms you don’t understand, especially if you are a newbie. You might not know what a hash rate or a validator is, and that is okay. What you need to do is search these terms online and find out what they mean. One term or phrase explained can make the entire whitepaper and project make much more sense to you. To understand a whitepaper, you need to know what the terms mean instead of going based on assumptions. 

  • List Out the Assets 

If you’re dealing with a very dynamic project, it is not unusual for multiple assets to exist within the same ecosystem. One single project can have a governance token, utility token, NFTs, and much more. If you don’t know the difference between all of these, you can end up more confused than before. So, navigate to the assets section of the whitepaper and read about all of them. If you can, write them down in simple English by yourself and make sure you know what the project has to offer.

  • Look For Images 

Many of us are visual learners and grasp things better if they are visually depicted rather than written as text. Most whitepapers have images to depict the minting process, the use cases of the tokens, the roadmap, and much more. Skim through the whitepaper and look at each of the images to get a better idea of what it is saying. If the document has an appendix that might shed even more light on them, take a look at that as well. If images aid your understanding, don’t hesitate to use them. 

  • Simplify Use Cases 

The worst thing that can happen after reading a whitepaper is not knowing exactly what the crypto asset in question does. Is it a gaming token that unlocks new characters? Is it a meme coin that offers only hype? As we said earlier, you need to list all the assets attached to this project. You also need to be able to say, in a few sentences tops, what it does. This will inform your decision to invest in it or not and can help you tell the wheat from the chaff.

  • Leverage AI 

These days, we use AI for everything from writing emails to creating art. One notable use of AI is simplifying information for users and making it more understandable. If you’re trying to get a better grasp of a crypto whitepaper, you can upload the document to a generative AI tool like Chat-GPT and ask it to condense and simplify it. All the major points can be summarized for you in a language that isn’t intimidating. By doing this, you save time and effort.