Token Generation Event
Updated: Nov 2, 2022
A Token Generation Event (TGE) is a common practice in the cryptocurrency industry. This term is used when a new token is generated and released into the market.
Before going deeper and explaining this process, it is essential to understand the difference between coin and token, two concepts often mixed up.
Differences between coins and tokens
Coins are investments, and their value is based on a volatile market. They are mainly used as a storage of value.
Tokens are a kind of “digital asset” built on a blockchain and generated by a smart contract with different use cases; for example, they could be used as commodities or “voting power” in a specific DAO, and nowadays, they have become so popular thanks to DeFi (Decentralized Finance). Regarding regulation, the SEC (Security and Exchange Commission) and the Swiss Financial Market Supervisory Authority (FINMA) have broken up tokens into utility and security.
Utility tokens allow holders to use a network and other specific benefits explained by the team. Their value may fluctuate based on the supply and availability.
Security tokens are different ones; their value derives from serving as tradable assets and is subject to restricted regulations.
What means TGE?
A Token Generation Event is a phenomenon regarding creating a token with two main purposes:
generating a new token;
launching it on exchanges (both CEXs and DEXs).
It is similar to an ICO, a type of public funding to raise capital for early-stage companies, with some differences.
"Initially, the term ICO, which refers to initial coin offering, was used to refer to the initial release of cryptocurrency tokens to the public as a fundraising mechanism. However, some projects began coining different naming conventions due to regulatory concerns about ICO being modelled after IPO (Initial Public Offering) and its implication as an investment vehicle. Token Generation Event (TGE) is one such convention.”
In the industry, people tend to prefer a TGE over an ICO due to its less restrictive rules; funds raised from TGE are not taxable. Moreover, a Token Generation Event plays a crucial role in a cryptocurrency project, especially for marketing purposes. An announcement of a TGE keeps the investors updated about the entire launch process and increases their interest.
When launching a TGE, it’s fundamental to consider the token's liquidity, future pairing, and exchangeability. The more reputable the exchange on which the token will be launched, the more impact there will be on the price and its popularity.
The leading process of a TGE
The process that leads to a Token Generation Event is made up of different stages:
outline the project, including all the functions and utilities of the token;
define the token’s legal compliance;
draw up the framework;
development of the token.
After coding and testing procedures, a whitepaper will create. It is a helpful document that collects all the essential information regarding that token, like tokenomics, technical aspects, business goals, and the project roadmap.
On Nasdaq.com, you can find an interesting article published by Bitcoin Magazine about “how to launch a token” with the proper steps and criteria.
Pay attention to the meaning of supporting the right project. Those who invest or hold tokens at an early stage receive many benefits, including a favourable price.