Whitepapers are essential components of any token sale. This document will serve as a primary source for potential token purchasers, investors, and platform users trying to decide whether to get involved with your company. Your marketing, event networking, website design, and of course the quality of your actual product are all essential components of launching a token sale.
But your white paper is where you’ll synthesize and explain the entire value proposition of your platform, making a coherent case for its feasibility after your marketing has drawn in potential investors.
The crypto market is undeniably in the midst of (or possibly at the beginning of the collapse of) a bubble. Many analysts have compared the crypto bubble to the dot-com bubble, pointing out that while several dot-com companies collapsed in the early 2000s once fundraising fervor over internet stocks died down, companies such as Amazon who offered true value propositions survived and thrived. The amount of fundraising flying around the crypto world right now may trick founders into feeling complacent, but as the bubble contracts and token buyers become more choosy about their investments, your whitepaper will be one of the crucial tools that helps your company thrive in the next era of blockchain.
Explaining the Problem Your Company Solves
A recent study from CB Insights found that the number one most common reason for startup failure is lack of market need. The days of any token at all selling well despite its practical value (e.g., Dogecoin or Useless Ethereum Token) are coming to a close, and it’s increasingly essential that crypto startups can show they address a real market need.
Your whitepaper is a perfect place to do this. Fr8 Network, for example, is a blockchain startup using tokens to address pressing issues in the logistics industry. They open their whitepaper with “A Short History of Domestic Trucking,” which explains the market they’re entering, and a section titled “Industry Pain Points,” which explains the exact problems their token would address. By the time readers start getting into details of the token platform, they already possess a well-developed understanding of the market need Fr8 Network answers. Readers have to be experts in neither blockchain development nor supply chain management to understand Fr8 Network’s value proposition.
Delineating Your Token Economy
Token buyers care about your market need, but they also care about your company’s internal economic structure and token economy. Investors are loath to give companies money without a clear understanding of how the company would use that money to make improvements and provide returns, and while token buyers often aren’t traditional investors, they still want to see a feasible plan for how you’ll spend the money they give you. Their concerns are not unfounded: almost half of 2017 ICOs had failed by early 2018, and purchasers of those abandoned tokens have no recourse for reclaiming their money or finding out how the failed ICO spent it.
Token purchasers also care about how you plan on managing your token market. They’ll want to understand how scarcity functions in your model. It’s a fundamental economic principle that value drops as supply increases, so your token holders don’t want to pay one price for a token only to have it be worth much less a year later, thanks to a flooded market. Token purchasers will also want to understand how your tokens get distributed. Private pre-sales that grant purchasers steep discounts can create massive token-holding “whales” who can significantly affect the market later, and token purchasers want to understand the potential of that risk.
SuccessLife, a crypto venture launched by Success Resources to bring blockchain utility to the thriving personal development market, devotes several pages of their whitepaper to delineating their token economy. Different sections describe private sale stages and discount levels, public sale stages, a soft cap and hard cap, a breakdown of how they will allocate the supply across their token economy, and a description of how they will spend funds raised by the token sale. Investors finish the whitepaper with a clear understanding of how SuccessLife will spend their token sale revenue and how the tokens will hold their value over time.
Explaining Your Technology
Some companies, such as Fr8 Network and SuccessLife, meet market needs by bringing blockchain utility to industries that could benefit from it. Other companies create value by bringing entirely new technological applications to the blockchain world. For these companies, explaining their technology is essential to attracting token purchasers.
White papers are crucial to sharing technological value propositions with investors. Dispatch Labs is launching a new blockchain protocol for improving the technology’s scalability and storage capacities. The bulk of their whitepaper covers “Technical Specifications” explaining how their protocol works. At the same time, they’re careful to include an Abstract, a plain-language “Introduction to the Dispatch solution,” and a list of use cases. A common pitfall of white papers is to get so lost in technical jargon that non-technical readers can’t understand the value the company offers. Dispatch demonstrates how to accomplish both a technical product description and a plain English one.
Don’t underestimate the importance of your whitepaper for your company’s long-term success. This document makes the case that your token is worth its purchasers’ money and interest.