The need for TGE arose from the legal technicalities of ICOs. In a world where the law and judicial systems can be weaponized and cripple projects with frivolous lawsuits, TGEs emerged as the best option. So, what is TGE in crypto? Here’s a simple guide on how token generation events work.
What is a Token Generation Event?
To fully understand token generation events, let’s first discuss the difference between a token and a coin, and understand the concept of tokenization.
A crypto coin, on the other hand, is a digital asset that’s native to its own blockchain. Think of ETH on the Ethereum blockchain, BTC on Bitcoin blockchain, or NEO on the NEO blockchain. A token, on the other hand, is a digital asset created on an existing blockchain using that blockchain’s smart contract standards. For example, tokens on Ethereum are ERC-20 tokens, those on NEO are NEP-5 tokens, SPL tokens for Solana blockchain, etc. Ideally, anyone can create their own custom tokens on a blockchain through the process of tokenization. Generally, most tokens are designed for utility across your project’s blockchain ecosystem.
A token generation event (TGE) is basically a token launch – when a blockchain-based project creates and issues tokens to raise funds from investors – private or public. It represents the moment when, for the first time, a token is generated on an existing blockchain and used to crowdsource funds for a project. Typically, TGEs are used to publicize and engage with the crypto community with the end goal of fundraising.
How Token Generation Events Work
Any TGE in crypto has two primary goals: one, generating a project’s token, and two, popularizing and launching the project in the crypto community and eventually listing it on crypto exchanges.
It goes without saying that your token should be listed on at least one CEX or DEX. A strategic listing on a top crypto exchange could significantly increase your project’s reputation and exposure. Tokens’ pairing, liquidity, and exchangeability are major drivers of their success and adoption.
During the initial steps of your TGE, you should factor in token minting, distribution smart contracts, thorough security audits, and escrow, vesting, and lock-up contracts. That’s because every bit of planning and execution effort that goes into a TGE in crypto is meant to safeguard the interests of your project and that of your investors. This is why a transparent distribution of tokens and safe delivery of funds are imperative.
As we’ve mentioned, a TGE in crypto is meant to raise funds. Since TGE in crypto has some similarities to an initial offering, a token presale strategy could be factored to hype your project. And although the announcement of a TGE alone can be a strategic PR and marketing move, you will still need to implement proven and successful crypto marketing strategies.
How you market your TGE is just as important in determining crowdfunding success as the technical aspects of your project. And since most of the events surrounding a TGE in crypto will happen concurrently and you may have to outsource a significant amount of work to well-connected crypto marketing agencies. In the end, the more engaged your project community and potential investors are, the more likely your TGE will be successful.
Difference between TGEs and ICOs
TGE in crypto and ICOs have similar end goals – fundraising for a crypto project from the public and having the token listed on a crypto exchange. However, ICOs have become burdened with regulatory consequences from different jurisdictions creating potential liabilities for a project. And this begs the question, what’s the difference between TGEs and ICOs?
A TGE is different from an ICO in legal terms. ICOs are subject to regulatory oversight, but TGEs are structured in a way that these tokens aren’t regarded as securities and the project is not liable for any tax penalties. They don’t carry the same legal implications and regulatory concerns that ICOs do; which makes them easier to run, and possibly less costly than ICOs. And as we noted earlier, there’s a difference between crypto coins and tokens, and this alone makes a huge difference between TGEs and ICOs.
And although tokens issued from a TGE can be traded on crypto exchanges, they are primarily designed so that token holders can use them to access the services or privileges offered by the project, or in an ecosystem.
A token generation event can be summarized as when a blockchain project creates and releases its tokens. Arguably, we can say that IDOs and IEOs are born from token generation events. TGEs have more in common with IEOs and IDOs since they tend to not have any regulatory oversight from financial regulators.