Why ICO White Papers Keep Getting Longer
The crypto bear market has made it a lot harder for blockchain startups to raise money. There are considerably fewer initial coin offerings (ICOs) than in early 2018, when people were much more excited about crypto.
Yet white papers, the documents that ICO projects use to raise money, just keep getting longer. After going through nearly 1,600 blockchain white papers, here are some other trends we found.
From academic papers to business plans.
For a long time, white papers were mainly used to explain policy or academic research. White papers generally did not have a commercial purpose, and were far removed from the lives of ordinary people.
Over time, though, the term was gradually adopted by the corporate world to describe the same sorts of things: commercial research and policy papers. And when crypto was born in 2008, it emerged in the form of a short white paper on Bitcoin, published by the mysterious Satoshi Nakamoto. Today, for better or worse, white papers are a fundamental part of blockchain financing. These papers are where projects introduce their technology, vision, team and roadmap. White papers in crypto are rarely academic documents anymore; they have become business plans.
White papers keep getting longer.
The 2008 Bitcoin white paper was a brief 9 pages; 3,219 words.
By 2014, white papers had gotten a lot longer. The Ethereum white paper was 13,866 words. If the Bitcoin white paper laid the basic foundation for cryptocurrency as we know it, Ethereum’s went on to describe the history of digital currency, the advantages and disadvantages of the Bitcoin system, as well as its own design ideas, describing a future of smart contracts and Dapps, or decentralized applications.
Not every white paper has that same volume: In 2017, EOS's white paper was just 7,530 words, shorter than Ethereum’s but still almost double the length of Bitcoin’s. EOS’s white paper structure is similar to Ethereum’s. It analyzes the advantages and disadvantages of previous projects and explains EOS’s goal to build a blockchain operating system, its infrastructure, consensus mechanism, and other functional characteristics.
But overall, white papers are getting longer. The Block came to a similar conclusion here. The results of our own analysis are in the figure below. Note that we’ve included data from 2019 because each project is charted based on its planned launch date; many ICO projects slated for launch in early 2019 have already released white papers.
In Q1 and Q2 2016, the average length of a white paper was less than 3,000 words; by Q4 2016 that number had spiked to 10,000. But at that time, there was still a relatively small number of projects. As you can see in Figure 2, since 2017, there has been an explosion of ICO projects in the two years since.
The average length of the white paper generally reflects this trend. White paper length has grown steadily from less than 6,000 words in 2017 Q1 to nearly 9,000 words in Q3 in 2018.
We have a few basic theories to explain the increase in length.
There’s a lot more background information… The Bitcoin white paper was so original that it did not include a whole lot of reference material. As the industry has matured, projects add more about blockchain technology and consensus mechanisms, as well as industry background and pain points.
…And also more jargon
Quantity is not necessarily quality. Some white papers are filled with technical details for the purpose of making the project look impressive and complex to the average reader. Thus the growth in average white paper length could be more a reflection of branding and marketing trends in the industry rather than any qualities inherent to the projects themselves.
More competing product analysis
As the industry grows and more and more similar products appear, projects may feel inclined to detail the advantages and disadvantages of their competitors. Early projects had no competitors or included obvious differentiating factors that didn’t require further explanation. But today with multiple blockchain projects fighting for space in each niche, more head-to-head comparison to clarify a project’s unique selling points is sometimes required.
As countries all over the world attempt to regulate ICOs, projects will feel the need to insert more legal disclaimers into their white papers.
Whatever the reason -- and it’s probably a little of all of the above -- there’s no doubt that white papers are getting longer. The next question to watch for: will the crypto market’s downturn have any impact on white papers in the long run. As 2019 projects’ white papers start to come in, we’ll see if the trend of lengthening white papers will continue.