How I Analyze Whitepapers

Any cryptoasset worth pursuing has a white paper. A white paper is a document that’s often used to outline a proposal inside a company or an organization, and it’s usually written by a thought leader or someone knowledgeable on the topic.

White papers are significant in the crypto landscape and are used to introduce an asset to the world. They are fundamental to investors and academics when analyzing a cryptoasset. Therefore, it should be one of the first places you go to execute your fundamental analysis.

When reading the white paper, there should be a set of main questions it should answer:

What is the problem?
How is the asset solving the problem?
Where does the asset stand in the competitive landscape?
What are the technical details?

Some white papers can be highly technical. It’s essential to try your best to understand these technical specifics. I usually print out the white paper to read and have my phone and computer by me so I can research any terms or processes that seem confusing and then take notes on the paper for comprehension. I’ll also make sure to write down any questions I have to investigate later. Some assets will also provide a “light paper” that summarizes the technical specifics in a more digestible format.

My process goes like this:

Read the introduction of the white paper
Read the light paper
Read the conclusion of the white paper
Go back and read everything in between the introduction and the conclusion of the white paper.

That way, I can focus on understanding the goals of the asset first and then shift my focus on understanding the technicalities later. It can be hard to do both at the same time (for me, at least).

There are also subreddits or discord channels usually dedicated to the asset. Those channels can be filled with passionate community members that are more than willing to give you an ELI5 on the technology and its value add.

One thing I always look for in the white paper is the balance between vagueness and thoroughness. Vagueness is not your friend. If the white paper lacks specificity and seems intentionally vague, that is not a good sign. Many white papers do have technical holes in them. Usually, the writer addresses the technical gaps transparently and admits they need to find that solution to succeed. That’s fine; nothing is perfect at birth. Ideas improve with work, experience, time, and community/user input. However, you should monitor what they have done or are doing to fix those technical holes and if there were any tradeoffs.