Token Generation Event
Updated: Apr 14
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 tokens and security tokens. However, there are more than 2 types of tokens.
The 9 types of crypto tokens
1. Utility token
A utility token is a type of cryptocurrency that is designed to provide access to a specific product or service. It is used within a specific platform or ecosystem, and its value is determined by its usefulness within that platform.
2. Security token
A security token is a digital representation of traditional security, such as stocks, bonds, or real estate. It is subject to securities regulations and provides the holder with ownership rights and/or entitlement to income from the underlying asset.
3. Payment token
A payment token is a type of cryptocurrency that is designed to be used as a means of payment for goods and services. It is typically used to facilitate transactions on a blockchain network and can be exchanged for other cryptocurrencies or fiat currencies.
A stablecoin is a type of cryptocurrency that is designed to maintain a stable value. It is typically pegged to a fiat currency, commodity, or cryptocurrency, and its value is maintained through various mechanisms, such as algorithmic control, collateralization, or redemption.
5. DeFi token
A DeFi token is a type of cryptocurrency that is designed to be used within decentralized finance (DeFi) applications. It is typically used for governance, liquidity provision (like in liquidity pools), or as collateral for lending and borrowing.
Non-fungible tokens (NFTs) are a type of cryptocurrency that represent unique, indivisible digital assets, such as art, music, or collectibles. They are typically used to prove ownership and authenticity of these assets.
7. Asset-backed tokens
Asset-backed tokens are a type of cryptocurrency that represents ownership in a physical asset, such as real estate, commodities, or precious metals. The value of these tokens is typically tied to the value of the underlying asset.
8. Exchange tokens
Exchange tokens are a type of cryptocurrencies that are issued by centralized exchanges. They are used to facilitate trading on the exchange, and users can often use them to pay for trading fees or receive discounts on fees.
9. Privacy tokens
Privacy tokens are a type of cryptocurrency that are designed to protect the privacy of the user. They use various techniques to ensure that transactions remain private, such as encryption or obfuscation. Examples of privacy tokens include Monero and Zcash.
What means TGE?
A Token Generation Event is a phenomenon regarding creating a token with two main purposes:
Generating a new token;
Launching the new token 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.
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.
To understand why the community prefers a TGE over an ICO.
The process of a Token Generation Event
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.
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.