In theory, crypto white papers are staid, scientific documents intended to describe a complex, precise method for creating unique blockchain products.
In practice, however, white papers are frequently a marketing play intended to help crypto startups generate earned media. Even so, they are still very much in demand — in certain situations.
To find out which types of white papers resonate with potential supporters and investors, I asked a number of crypto creators: What does an effective white paper look like in 2022, and is it still a hard requirement?
Do you need a white paper?
The short answer is “yes,” but a number of changes in the industry are reshaping the way participants and investors look at white papers. Traditional scientific white papers are falling by the wayside, replaced by documents that read more like a well-designed financial prospectus.
A great white paper needs to show that the project has transparency. Kolapo Akande, founder of Pledge Utility Coin
We’ve seen a number of white papers in the form of PowerPoint-style decks or even videos. Regardless of format, to achieve the main goal of defining what kind of product you are building, this document will require input from a wide variety of stakeholders.
For tokenized securities, for example, white paper authors must work with a legal team to ensure that they are accurately describing a project’s parameters and regulatory compliance. If it’s a fintech product that doesn’t hold client crypto or fiat currency, they can afford to be slightly less regimented. That said, in some cases, a white paper will be an integral part of startup strategy.
“Many financial parents or exchanges are not licensed to offer securities, which is why they would look at the white paper or token-issuing memorandum during their due diligence,” said Yana Afanasieva, CEO and founder of Competitive Compliance.
“In most FATF-regulated countries, token issuance to the public requires registration or notification with financial authorities, and where this is the case, an equivalent of a white paper is actually mandatory.”
Even so, do investors read white papers? In most cases, it’s best practice to create an investor deck, a white paper and a simple one-pager to offer to investors. Many white papers can top 30 pages, but having all three available makes it easier for investors to flip through your offering and dive deeper as necessary.
“Crypto white papers were mainly used to raise investor capital amidst the 2017 ICO boom,” said Lisa Fridman, co-founder of Quadrata. “This has changed over time; in today’s more mature crypto market, investors are looking for more than just a white paper describing the founders’ vision. They appreciate additional data points supporting the thesis and proof of concept.”
Other crypto founders and investors think white papers are going the way of Satoshi – disappearing.
Amanda Cassatt, co-founder of Mojito, advises against drafting a white paper unless there’s a clear academic angle to the project: “Try having a simple website that clearly explains your project, good developer documentation, and blog posts to update the community on your progress.”
How much does a white paper cost?
There are currently two routes for white paper production. The first is the obvious Fiverr/Upwork method, where companies work with an independent writer who specializes in white paper design. The Fiverr providers I interviewed said they could write much of their clients’ white papers, but preferred not to deal with complex issues like tokenomics and disclaimers. These consultants cost anywhere between $500 and $1,000.
For the most part, you will have to write the white paper yourself before passing it on to one of these editors unless you are comfortable using boilerplate in your documents. Your best bet? Hire one of these editors to spruce up a scientific white paper and turn it into more of a presentation-style document.
Blockchain consultants who will write a paper from beginning to end and understand the vagaries of tokenomics are harder to find, so reach out to extant project owners and ask them for advice. I’ve spoken to a number of these consultants over the years, and the current going rate for a soup-to-nuts white paper is $8,000 to $10,000.
This work requires a deep understanding of the product or token, as well as an innate understanding of blockchain. The goal in hiring these consultants is to understand their limitations – no outsider knows your business like you do, so create a brief that helps your consultant understand what they must include, and what can be cut.
Look for writers who have experience in your particular industry: A white paper for a DAO is very different from one for an equity token. Many writers will accept crypto as payment, but expect to pay a bit more for truly savvy contributors.
Every consultation requires a white paper brief, however, and that often needs as much work as the white paper itself.
The white paper parts
“Broadly speaking, there are two ways you can go about writing a white paper — you can make it flashy and turn it into a marketing tool, or focus on making it functional. In my opinion, the latter is more important, although it never hurts to make a document attractive and easy to read,” said Adam Phillips, business operations manager at Kirobo, a DeFi product.
The experts we spoke with also recommended working with a third-party writer who can write, edit and even translate the white paper into target languages.
Tokenomics are the hardest part of a white paper. This section is important primarily because it describes how the product token will be sold/airdropped and how many tokens the creators will retain and for what purpose. The key?
“A great white paper needs to show that the project has transparency,” said Kolapo Akande, founder of Pledge Utility Coin. “Transparency cuts across things like team membership, projected use of funds from the presale, and plans for locking any tokens that are not going to be immediately used post-presale.”
In the run-up to the ICO craze, tokenomics was a difficult prospect for most founders. Now, however, sites like AllCryptoWhitePapers.com can show you the general outline for many successful products. Further, you might not be using a token at all.
That said, transparency and truthfulness are key, which leads us to …
The use of proceeds. This section describes how any invested money will be used. Whether it is through a token sale or a straight cash investment, you should describe, in detail, what you plan to spend cash on for the next 12 to 24 months. A simple spreadsheet usually suffices and it should include hosting costs, development costs, office rental and developer salaries. Charts are especially helpful here, including timelines and spreadsheets.
As with any product, offering a transparent road map that accurately describes the current status of your project is key, but be careful to avoid forward-looking statements that could confuse or frustrate investors in the future. Have a firm, concrete plan and refrain from making speculative declarations like, “potential products could include.”
Remember also to get a lawyer’s take on your paper. Crypto law is now a popular practice, and we would recommend hiring a global firm with a wider grasp of crypto law than a local purveyor. The pricing for this varies, but is not cheap — even a small firm will likely charge a few hundred dollars per hour. Start small: Ask a lawyer to look over your disclaimer and tokenomics, then expand once you’re comfortable with the rate and work.
A good white paper is a team effort. Bringing in outside help and counsel is a must. That said, the days of the formal white paper are numbered, so check out the competition, identify a target audience, and hire a professional before you commit your time and resources.