TGE in Cryptocurrency: Distribution Mechanism and Practical Application

Token Generation Event (TGE) — is the process of creating and distributing digital assets by a crypto project among interested participants. Although TGE is often confused with ICO, these are fundamentally different concepts pursuing different goals in the development of the blockchain ecosystem. Let’s understand how TGE works in crypto, why projects resort to it, and how to evaluate a potential offering.

Key Differences Between TGE and ICO

While both mechanisms involve issuing digital assets, their approaches differ radically. TGE in crypto focuses on distributing utility tokens that grant access to the project’s functions and governance. ICO, on the other hand, is traditionally used to raise funds by selling assets that regulators often consider securities.

Projects aiming to avoid regulatory scrutiny choose TGE as a mechanism to emphasize the utility nature of their assets. In this case, the crowdfunding aspect becomes secondary to the goal of integrating users into the ecosystem.

Why Conduct a Token Generation Event

Expanding the User Base. Issuing tokens creates an incentive for new participants to join the project. Distributing assets among early adopters and active users consolidates community strength, which drives development.

Implementing Governance. Tokens provide voting rights. Holders can influence key decisions related to changing project parameters, approving updates, and treasury fund allocation.

Stimulating Economic Activity. Smart contracts allow programming reward schemes — staking, liquidity farming, governance participation. These mechanisms encourage users to actively interact with the service.

Ensuring Liquidity. When tokens start trading on exchanges, a healthy market forms where prices are set naturally by supply and demand. High liquidity protects the price from sharp fluctuations.

Attracting Capital. Despite focusing on utility, TGE can serve as a fundraising tool for project development. Blockchain technology enables quick asset distribution without intermediaries.

How to Properly Evaluate a TGE: What to Pay Attention To

Before investing time and money into an upcoming token generation event, it’s recommended to conduct your own research.

Study the whitepaper. The document should clearly describe the problem the project addresses, the technical stack, development roadmap, team composition, and tokenomics. Try to understand the project’s position within the Web3 ecosystem and its differentiation.

Analyze the team. Check the track record of founders and developers. Do they have successful industry experience? Are reputable advisors involved? A team with a proven history is more likely to successfully execute ambitious plans.

Check the community. On X, Telegram, and other platforms, look for objective opinions from developers and users. Community activity, quality of discussions, and the team’s responsiveness are good indicators of project health.

Assess risks. Familiarize yourself with the legal status of the project in different jurisdictions. What is its competitive position in the niche? What unique advantages does the solution have? Evaluate potential threats — from rug pulls to technical vulnerabilities.

Real Examples of Token Generation Events

Uniswap and DEX governance.

Decentralized exchange Uniswap conducted a TGE in September 2020, issuing the governance token UNI. One billion tokens were created with a distribution plan over four years until September 2024. UNI holders gained voting rights in protocol governance. Simultaneously, a liquidity mining program was launched: users providing assets to four specified pools received UNI rewards. The current UNI price is $5.45.

Blast: L2 solution integration.

Ethereum Layer 2 solution Blast initiated a TGE on June 26, 2024. The preliminary creation of the BLAST token and deployment occurred four days before the main event. Airdrops were received by users who transferred Ether or USDB into the network, as well as those who interacted with decentralized applications on the platform. At TGE, participants were allocated 17% of the total BLAST supply.

Ethena: DeFi stable solution.

The Ethena protocol, which implemented the synthetic dollar USDe, held a TGE on April 2, 2024. 750 million ENA governance tokens were distributed via airdrop to shard holders — assets received by users for interacting with the ecosystem. This reward recognized early participants’ contributions. The current ENA value is $0.23.

Key Risks and Realities

The main risk associated with participating in a TGE is a scheme rug pull. The scenario unfolds as follows: the creator issues tokens, inflates the price through marketing or manipulation, then suddenly liquidates their position and disappears with the profit. Other holders lose almost everything. To minimize this risk, thoroughly research the project, check the reputation and online presence of the team, and review information about the founders’ past products.

It’s important to understand that participating in a TGE does not guarantee income. The crypto market is volatile, especially with young projects. The primary goal of a TGE is often to stimulate token adoption and ecosystem growth, not speculation. Focus on the long-term value of the project rather than hoping for instant price growth.

Not all crypto projects conduct TGE. Some ecosystems are sufficient to operate without their own token. However, most active projects tokenize their services, so token generation events remain an important milestone in blockchain development.

Conclusion

TGE in crypto is a key mechanism for issuing utility assets, encouraging user participation, and developing decentralized ecosystems. Differing from ICOs by focusing on governance tokens and functionality, TGE often rewards early participants and lays the foundation for building an active community. For those who believe in the long-term potential of a specific project, it’s worth closely following announcements of upcoming TGE. It’s an opportunity to actively participate in the growth of new solutions and strengthen your portfolio through informed investments.