Whitelist In Crypto

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21 Aug, 2024

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A whitelist in crypto is a list of approved cryptocurrency investors and wallet addresses having the approval to participate in an event, like an initial coin offering or non-fungible token launch. Cryptocurrency project owners conduct whitelisting to ensure participants comply with the set rules and regulations concerning the token sale.

The whitelisting procedure is a security measure, preventing fraud and ensuring that only investors fulfilling the eligibility criteria participate in the token sale. The parameters may include factors such as investment history and geographic location. The approved members may include wallet addresses, organizations, algorithms, or individuals. Whitelisted owners can get special benefits like bigger allocations and reduced pricing.

What Is Whitelist In Crypto?

The whitelist in cryptocurrency refers to a list of crypto wallet addresses and users that have the authorization or preapproval to enjoy certain rights, participate in certain events or activities, or conduct specific operations within a blockchain network or cryptocurrency ecosystem.
The eligibility criteria that one needs to fulfill to make this list include a minimum investment amount, a favorable investment history, an account in good standing, etc.
A key benefit of making a whitelist in cryptocurrency is that people get to buy cryptocurrency at a reduced price.
A disadvantage of whitelisting is that the process may not be fair.

Whitelist In Crypto Explained

The whitelist in crypto refers to a list that includes the list of participants who have the approval to participate in a certain crypto event, for example, an initial coin exchange (ICO). It guarantees that only the participants meeting the eligibility parameters can participate. Organizers creating such lists may include criteria like an account in good standing, a minimum amount of investment, etc. Whitelisted or allowlisted users can get special benefits, such as table gas fees and minimized pricing.

In the cryptocurrency ecosystem, users who make it to a whitelist or allowlist get priority in forthcoming events like an ICO. As noted above, crypto projects assess the potential investors based on the necessary parameters before giving approval. Usually, investors want to make it to the whitelist because it gives them multiple advantages.

Besides getting an early access benefit, traders can take advantage of a set time slot and competitive pricing. All cryptocurrency projects have their time slot. Allowlisted investors must wait for the allotted slot to access the various benefits. Additionally, whitelisting helps in creating hype around a project. In many cases, loyal traders who actively engage get approval to fulfill this objective.

How To Get Whitelisted?

The process of becoming a part of a whitelist in crypto involves the following steps:

Register For The Whitelist: The first step involves giving basic personal information, like email address and name.
Verify Identity: In this step, the investors need to provide any government-issued ID, for example, a driver's license or passport and a proof of address document, like a utility bill. Note that usually, organizations carry out a KYC (Know Your Code) process to verify investors’ identity.
Submit The Other documents: In a few cases, one may need to submit more documents, such as a self-accreditation form, proof of income, and W-9 form, depending on the jurisdiction and organization.
Wait For Approval: After submitting all the necessary documents, wait until the organization completes reviewing the application and gives approval for the whitelist. Note that applicants will receive a notification regarding their whitelist status via mail.
Participate In The Token Sale: After getting approval, investors can take part in the token sale or initial coin offering (ICO). For that, they must send cryptocurrency (Ether in most cases) to the token sale’s smart contract address from the whitelisted address.
Receive the tokens: Once the token sale is over, the tokens the investors purchased will be transferred to the specific address from which they sent the cryptocurrency.

NFT Whitelist

NFT(non-fungible token) whitelisting refers to a practice that involves approving a list consisting of mail addresses, applications, and IP addresses and simultaneously rejecting everything else. The allowlist members have special rights that enable them to access a particular market before the rest can. In other words, the non-fungible token allowlists are lists consisting of wallet addresses having exclusive rights. This ensures the ability to mint at least one NFT at a specific time on a particular date.

If whitelisted, NFT buyers get guaranteed mining access and lower prices. Moreover, they can steer clear of exorbitant gas fees and network traffic because they can decide when they wish to mint.

Examples

Let us look at a few whitelists in crypto examples to understand the concept better.

Example #1

Suppose David, a cryptocurrency trader, is interested in ABC cryptocurrency's forthcoming initial coin offering because of the digital asset’s use cases and potential. So, he initiated the allowlisting registration process by providing personal details. Then, he completed the KYC verification process and submitted the required documents. After that, his name made the whitelist in crypto, which allowed him to get access to bigger allocations and lower prices.

Example #2

In April 2023, an innovative platform named AIGameToEarn started whitelisting registrations for its launch. The whitelist was open to a total of 2,000 lucky individuals. Of them, 200 spots were for contest winners, contributions, and giveaways. People who hurried and completed the registration in time could buy 2 artificial intelligence or AI NFTs on the mint day and take part in the 1,000 leaderboard of the platform.

Note that making this list was not a prerequisite. People who missed out on the opportunity could still get rewards by finishing quests and being a part of the community.

Benefits

A whitelisted investor can enjoy the following advantages:

Investors on this list can get free cryptocurrency giveaways.
Individuals can get a head start when it comes to creating non-fungible tokens.
People can purchase cryptocurrencies at minimized prices besides getting access to a project’s features.

Risks

Some risks associated with whitelists in crypto are as follows:

Dependence on such lists can result in centralization, which would counter various decentralized projects’ decentralized ideology.
The selection procedure of the addresses for the list needs to be inclusive and fair.
Scaling whitelists in cryptocurrency can be a challenge, especially as projects and users rise in number.

Frequently Asked Questions (FAQs)

1. Is whitelisting in crypto good or bad?

Making the whitelist can be a good thing for traders as it allows them to purchase cryptocurrency at reduced prices and access different features of the project. Additionally, one who makes a whitelist can receive cryptocurrency giveaways for free. However, whitelisting has its cons. For example, the selection process may not be inclusive. Hence, one must weigh the advantages and disadvantages before registering for the whitelisting process.

2. Is whitelist in crypto secure?

Yes, it is secure. In fact, by whitelisting wallet addresses, people can secure the funds from getting withdrawn or transferred to any other address, making the digital assets safer. Besides this, one cannot steal funds using a wallet's public address only.

3. What is the future of whitelisting in crypto?

Such lists may become even more important for managing user access to decentralized applications or dApps. They could allow the app developers to limit access to particular functions to certain user groups, potentially improving the efficiency and security of their apps. Additionally, with the possibility of cryptocurrencies facing additional regulations in the future in mind, these lists can improve the sector’s credibility.