Are you new to or eager to add new cryptocurrencies to your portfolio? You will have to pay close attention to token generation events (TGEs).
These events provide you with the opportunity to explore new blockchain projects by acquiring their tokens.
To make it easy to understand, think of it as being part of the first receivers of any new project on the blockchain, which might turn out to be the next big stock.
However, before you take a front-row seat at every new and untested token, you need to learn the terrain so as to identify opportunities and avoid scams. Also, you can get help from professionals like Blockchain App Factory to use their expertise in the token generation event.
In this article, we will be guiding you on what TGE entails, how airdrops and other offerings work, and how to identify good projects from fraudulently hyped ones.
What are Token Generation Events (TGEs)?
A token-generating event is when a dapp programmer officially puts each of these tokens out to the general public as a blockchain-based version of a commodity or asset that is often associated with a decentralised app (dApp).
Simply put, Token Generation Event (TGE) is a process by which a new blockchain-based network or initiative obtains money by offering its native token to the public. These tokens are used to reflect ownership interest or value in the project and as a virtual asset.
TGE is used for crowdfunding, allowing startup organizations to gather financial support from investors to support the project instead of relying solely on traditional ventures.
This function has helped bring many dApp ideas to life.
How Does a TGE Work?
The process of a token generation event involves the following steps:
1. Token Creation
The distributed ledger project creates its native currencies using popular blockchain technology platforms like Ethereum or Binance Smart Chain before holding a TGE.
To maintain seamless integration with current wallets and exchanges, these kinds of tokens are created as smart contracts that follow established norms, such as ERC-20 for Ethereum-based tokens.
2. Whitepaper
Once the token has been created, the project team then publishes a thorough white paper that explains to the public, their vision, goals, uses and application cases, and technical functions.
Individual investors review the document in order to determine the viability and possible profits of the project.
3. Initial Exchange Offerings (IEOs)
IEOs are TGEs that take place on digital currency exchanges. On the instructions of the project squad, the trading platform arranges for the token sale.
Due to the exchange’s review of the initiative prior to its currency sale, its participation adds a layer of protection and trustworthiness. The process is made simpler by the ability of investors to take part via their trading accounts.
4. Initial DEX Offerings (IDOs)
IDOs and IEOs share characteristics in nature, however, DEXs, as opposed to centralized markets, host IDOs.
DEXs enable a more decentralized and participatory method of trading tokens. IDOs may offer wider availability to a worldwide audience and frequently entail community involvement.
What are Tokens?
If you have been following, you will have found out that token generation events cannot succeed without their token. Now, what exactly is this token?
Tokens are assets or utilities that are rated and may be traded, without having any intrinsic value.
These tokens can be in the form of goods, reward points, or virtual characters from video games.
Although they are inseparable from coins, they have the same features as every other crypto coin out there.
Therefore, they are customizable and may be more useful than some coins because they operate on a smart contract.
So, when the token generation event occurs, some tokens are issued.
Types of Tokens Issued During TGEs
There are some types of tokens that are often issued during the TGE event. These tokens either allow users to have access to the platform or represent ownership.
These tokens are:
1. Utility Tokens
Access to particular products or solutions inside the project’s network is made possible by utility tokens.
Holders of these tokens can utilize them to accomplish a variety of things, such as enjoying system attributes, getting discounts, or taking part in initiative oversight and choice-making processes.
Although, the value of these tokens may fluctuate depending on supply and demand,
2. Security Tokens
Security tokens are governed by laws pertaining to securities in many countries because they are regarded as assets and can look like regular securities in some ways.
Security tokens reflect participation in a company or offer numerous economic advantages and rights to the owners. Bonuses, contributions to profits, ownership of shares, and other comparable economic interests are examples of these privileges.
Companies with projects that issue these tokens must adhere to laws and other security measures to ensure the safety of investors.
TGE vs. ICO: Why They Are Important?
Depending on the aim of the project, most companies can either use Token Generation Events or the ICO route to achieve their desired goals at the launch.
One simple way to differentiate between the two is through the function or system on which these coins or tokens are launched.
For example, the majority of applications that run on the blockchain associated with Bitcoin use currencies (coins), whereas many digital applications that run on the Ethereum blockchain engage in tokens, making this difference between the two simple to understand.
So, companies are cautious about the way they promote their specialized blockchain products because they are afraid of penalties and regulation, even if they end up serving the same purpose—a method for raising funds and kickstarting a project.
A Token Generation Event is nothing more than the production of tokens by a business that uses the Ethereum blockchain and often operates in the utility sector.
The producers usually refer to these token transactions as token generation events, or TGEs, in contrast to initial coin offerings (ICOs), since these sorts of tokens are effectively little chunks of a product.
Recently, there has been a lot of news on regulations aimed at classifying initial coin offerings (ICOs) as securities and subject to taxation. So, to avoid a tax penalty, Token Generation Events have been coordinated so that they are not securities.
Benefits and Risks of Token Generation Events
| Advantages | Disadvantages | |
| Early Access vs. Lack of Regulation | TGEs give investors the chance to participate in exciting new projects and buy tokens before they are publicly distributed. For investors looking for early chances, this privileged access might be quite lucrative. | Investors are at risk of losing money due to bogus TGEs, frauds, and a lack of government control in the crypto market. It may be challenging to distinguish between trustworthy projects and harmful ones due to a lack of adequate regulation. |
| Strong Community vs. volatility | TGEs are essential in creating a vibrant and involved community around a project. This becomes especially crucial for initiatives whose success depends on user acceptance because a strong community may foster development and long-term viability. | Tokens acquired through TGEs are subject to considerable price volatility, which can result in investors experiencing both significant gains and losses. The market for cryptocurrencies is volatile by nature, which poses hazards and necessitates careful thought. |
| Fund Sourcing vs. Project Viability | TGEs are an important source of funding for blockchain initiatives. The money raised can be used to further nurture the project, increase advertising campaigns, and draw in more customers, all of which will help the project succeed as a whole. | There is a chance that certain TGE-initiated projects won’t fulfil their pledges or fall short of their intended objectives. Investors might therefore find themselves owning tokens with little or no use, which could lead to monetary losses. |
| Fundraising vs. Security Issues | TGEs have transformed fundraising by allowing companies and enterprises to quickly raise money internationally without middlemen. This simplified procedure lowers costs and increases the effectiveness of fundraising as a whole. | Criminals may attack TGEs, revealing platform flaws that could result in the loss of money or confidential data. Investors should use caution when considering the security precautions taken by projects undergoing TGEs. |
Also Read: Cryptocurrency Terminology 101: A Clear and Simple Guide to Key Concepts
End Note
If you have been following and enjoying the gist of our article, you will have found out by now that token generation is more than just raising funds. It is about building engaging communities, ensuring security, and providing real utility.
By understanding this terrain, you will be well-equipped to analyze tokenomics and avoid hype. That means, not even tokens are worth your attention, and not every token is promising despite their published whitepapers.
The blockchain world is constantly evolving, and we are yet to see the last of it. Therefore, new tokens will emerge.
Thus, you need to do your own research and be armed with the basics.
