What is TGE in Crypto?

If you live in Nigeria, you probably remember a time when most banks were hawking their shares like Gala and asking everyone to buy 😂. That was them looking for ways to generate more money to achieve their big goals, and they were using Initial Public Offerings (IPOs) and offers for subscriptions. Some companies like those banks crowdfund through public shares, while others pitch to investors for funding. Interestingly, the same happens in the crypto world 🤝. 

Crypto businesses, especially new projects, often use a common fundraising technique called TGE (Token Generation Event). The event makes their tokens public for anyone to buy, helping them raise funds for some milestones they’ve outlined for their projects. But how does TGE work, and what should you know about it? Keep reading 👇!

Understanding Token Generation Events (TGEs) in Crypto

TGE stands for Token Generation Event. It’s the replica of an Initial Public Offering (IPO) in the crypto world. A TGE happens when a new cryptocurrency or token is launched and made available to the public for the first time. 

You can consider it the event that represents the birthday or big debut for the project, usually used to raise funds and get its token into the hands of early investors 🎂. 

Now, why do crypto projects do a TGE? Well, imagine you are building a decentralised app (dApp) or an online trading platform. You need capital to pay your developers and a decent marketing or PR budget is not small money. Instead of going to venture capitalists or finding seed funding, you can launch a TGE and let the project’s community fund your project directly.

As an investor, the upside for you is that the new token could increase in price after the launch, and you can potentially make profits from the project’s success 🤑. 

But, it’s important to note that a TGE isn’t the same as an initial coin offering (ICO). Though both are used to raise funds for a new crypto project, an ICO is primarily used to raise funds in a project’s development phase, while a TGE is the official launch of a project that makes its tokens available for trading and other uses after development. 

Also, both ICOs and TGEs could trigger income tax (if tokens are received as payment or reward) and capital gains tax (if tokens are sold or exchanged for profit). But, when the tokens are issued for non-investment purposes (e.g., as part of a decentralised application or service) in a TGE, the investment may not be taxed.

How Does a TGE Work?

Before a TGE happens, here are the key steps taken by the project teams:

• Project Planning and Whitepaper Release: The initial planning is done and a whitepaper (the document containing the project’s details, goals, tokenomics, and roadmap) is released to the public 📃. 
• Token Creation: Next up is the actual creation of tokens through smart contracts on a blockchain. Ethereum and Solana are among the most popular blockchains used for creating these tokens, but many other blockchains like Sui have their own smart contract standards that can also be used.
• Presale and Public Sale: Depending on the project, there may be a presale phase where early investors, including venture capitalists, get the first chance to buy tokens at a discounted rate. Afterwards, there’ll be a public sale, where the tokens are offered to a wider audience.
• Token Distribution: Once the token sale or distribution process is complete, distribution to the other people happens. These people include investors, community members, or ecosystem participants. The tokens are usually stored in the users’ crypto wallets, and they can be traded on centralized exchanges (CEXs) like Quidax or decentralized exchanges (DEXs) like Uniswap if the project team decides to list the token on them.
• Project Development and Utility: After the TGE, the final phase is the development and actual usage of the platform or product that the token supports. The project team brings its plans detailed in its whitepaper to life, ensuring that the token fulfills its intended purpose — whether it’s for decentralized finance (DeFi) investing, staking, crypto services, or something else.

The Purpose of TGEs in Crypto 

Generally, TGEs are all about raising funds for a crypto project during its early days. But, there are a couple more reasons projects can host TGEs, depending on their goals. Here are a few of them below:

Token Distribution

Besides fundraising, TGEs can be used to distribute a crypto token to the earliest investors, partners, and the general crypto community. This helps in circulating the token and boosting its market value. 

Rewarding Network Participants 

Projects that run using network validators or miners can use the tokens generated during TGE to incentivise these participants. Similarly, proof-of-stake projects can reward network participants who stake their assets on their platforms. 

Community Building 

A TGE can also help projects build communities to drive their growth. These communities usually include the earliest adopters, users, and investors that are attracted to the project during its public token sale or distribution. 

Which Successful Crypto Projects Hosted TGEs?

Some big names in the crypto space that raised through TGEs include, but aren’t limited to:

• Tezos (XTZ) in 2017; raised $232 million 
• Filecoin (FIL) in 2017; raised $257 million 
• Eos (EOS) between 2017 and 2018; raised over $4 billion
• Polkadot (DOT) in 2017; raised $145 million
• Binance Coin (BNB) in 2017; raised $15 million

The Challenges and Risks of TGEs

As an investor, TGEs offer various possibilities, including the opportunity to make gains from the project’s future success. And as a business, it’s a great way to fund and launch your blockchain project. However, before investing in TGEs, here are some things to consider:

Scams and Rug Pulls

Scams remain a major challenge to the crypto space, and they are very common with early-stage projects. Some of them may seem legit at first, but are actually scams designed to collect investors’ money and leave them with a valueless token. 

Your best bet is to always do your own research (DYOR) before investing in a project’s TGE 👀.

Regulatory Uncertainty

The regulations around cryptocurrencies and token generation events are still unclear in most parts of the world. For instance, the US considers TGE tokens as a security, which makes them regulated. Meanwhile, countries like China and South Korea have imposed restrictions on ICOs and similar activities like TGEs ❌.

Price Swings

Even after investing in a legitimate TGE, the crypto market remains unpredictable. Price swings can cause a token’s price to rise or fall depending on market conditions, and investors may lose their capital if things go the other way 🌊.

Final Thoughts

A Token Generation Event (TGE) is usually one of the first major steps in the lifecycle of a new crypto project. It marks the token’s debut in the market, and can serve various use cases, including fundraising, rewarding network participants, or building a project’s community. 

While TGEs provide a great way to invest in a token early and potentially reap big gains, they also come with risks. So, if you’re looking to invest in a TGE, make sure you do due diligence and really understand the project.

Disclaimer: This content may cause extreme FOMO (Fear of Missing Out). Side effects of investing include sudden wealth (or, you know, the opposite 😢). Please do your own research (DYOR) or speak to your financial advisor before making any decisions.