What is a token generation event (TGE): how crypto tokens are distributed

A token generation event (TGE) refers to a crypto project creating and releasing a digital token to eligible users. TGEs usually involve the release of a utility token for the crypto project or service in question rather than coins, which often represent a store of value. TGEs can therefore be a significant moment in a project's roadmap and catalyst for growth.

There can be some confusion about what the term TGE actually means, because it's often used interchangeably with initial coin offering (ICO). In this article, we'll explain what a token generation event is and how TGEs are subtly different from ICOs, and explore their purpose in more detail.

TL;DR

• Token generation events (TGEs) typically involve utility tokens created on a project blockchain and released to eligible users.

• The term TGE is often used interchangeably with initial coin offering (ICO), although the two are subtly different. TGEs usually involve the release of tokens that support the operations of a crypto project, while ICOs are often used to raise funds through a token sale.

• TGEs are often launched by a crypto project to incentivize more users to get involved, reward long-term users, and boost liquidity for the token in question.

• Some high-profile TGE events in crypto past include those held by Uniswap, Blast, and Ethena.

A closer look at token generation events

During a TGE, a project will create tokens on its own blockchain before releasing the assets to users, giving them access to the project ecosystem and its features. However, users may already be involved in the project before the TGE, such as if the tokens are made available for pre-market futures trading.

As mentioned, tokens released through a TGE typically have a utility purpose and aren't considered to be a store of value. Meanwhile, because these tokens operate through smart contracts, they can be programmed for a variety of purposes, such as governance, payment within an ecosystem, and staking. Many decentralized applications (DApps) are built around and rely on tokens that are often released through a TGE, which is why such events can receive plenty of attention from the crypto community.

What's the difference between a token generation event and an initial coin offering?

The differences between a TGE and an ICO are subtle but significant. Although TGEs and ICOs generally serve the same purpose of releasing a digital asset to users, ICOs are typically held with the purpose of raising funds. TGEs can sometimes be held with the intention of crowdfunding, but they typically involve the distribution of a utility token to unlock access to a crypto project.

ICOs usually involve the distribution of coins that are subject to different regulatory scrutiny, including those that may be considered a security. As a result, some projects are careful to announce the release of a digital asset as a TGE rather than an ICO, to make clear their native asset is a utility token, rather than a coin.

Why do projects perform a token generation event?

TGEs serve many purposes as an important milestone in a project's roadmap.

Incentivize participation

Although a robust project will likely have attracted early adopters before a TGE event, the creation and release of tokens can incentivize more users to get involved. The distribution of tokens encourages adoption by giving users a fundamental resource they need to participate in a project — tokens.

Holding tokens can also bring various advantages to users depending on the smart contract logic. For example, token holders may gain voting rights over the project, with the number of votes tied to the number of tokens held. Meanwhile, some projects allow tokens to be staked on the network in return for rewards of the same token, allowing holders to grow their assets.

Reach new users

The interest around a TGE draws exposure to a project, attracting new holders to get involved and contribute to its growth. Many would agree that the strength of a crypto project's community is essential to its success. More users and developers should theoretically bring fresh innovation and potentially a rise in a token's value.

Increase token liquidity

Where projects release tokens that are then available to trade on cryptocurrency exchanges, TGEs are fundamental to increasing liquidity and reaching a wider audience. Higher liquidity can help to stabilize the token's price and support price discovery among buyers and sellers.

Raise capital

As mentioned, TGEs can sometimes help bring capital into a project, stimulating growth and innovation. Here, TGEs can provide an efficient way of raising funds by applying blockchain technology to generate and distribute assets. Doing so helps to make fundraising faster and more secure.

How to assess a TGE

Heard about an upcoming TGE and are interested in getting involved? We always recommend doing your own research first before committing time and funds to any project. Here are a few factors to look into as part of your due diligence when assessing a TGE.

Start with the project whitepaper

The first stop when understanding what a TGE is should be the whitepaper. This key document should provide all the information you need to understand the project's purpose, goals, core technology, roadmap, team, and tokenomics. The whitepaper might also provide helpful prompts for further relevant research. For example, the specific area of Web3 the project is a part of and how it contributes, providing you with valuable context.

Look into the founders

It's also wise to look into the project founders to understand how the project was formulated and what its prospects could be for the future. Multiple experienced founders with deep specialist knowledge may be better equipped to guide the project forward successfully than a team with lesser real-world credentials. Do the founders have a strong track record of success in this field? And what talent have they brought in to grow the project? These kinds of questions could help you extract valuable insights.

Check the social chatter

A search through X or selected Telegram groups can be helpful in understanding how the crypto community perceives the project behind a potential TGE. Often, these platforms show an unvarnished and impartial point of view as content is created by users and developers themselves. Being active in these communities and asking the right questions can help you to gain a rounded perspective on a project, so you're fully informed of the pros and the cons before making a decision on whether to get involved.

Understand the risk landscape

Taking the time to study the risk landscape can be another beneficial step in judging whether to get involved in a TGE. That means looking at the regulatory situation for the project and the space at large to understand the current and future compliance requirements and what they mean for the project. You could also consider exploring the competition to understand how saturated or otherwise the field is, and who the main rivals are.

Examples of crypto token generation events

Uniswap

Uniswap, the decentralized exchange that launched in 2018, released its governance token, UNI, in September 2020. One billion tokens were minted at launch and scheduled for distribution across a four-year period ending in September 2024. The release of the UNI token gave holders ownership of the project's governance process. The release coincided with the launch of a liquidity mining program that granted participants UNI rewards when they put their crypto assets to work across four pools.

Blast

Blast, an Ethereum Layer-2 solution, launched its TGE on June 26, 2024. This followed the deployment and pre-minting of the project's BLAST token on the blast mainnet four days prior. The token was airdropped to users who'd bridged Ether or USDB to the Blast network, and those who'd interacted with decentralized applications on Blast. Seventeen percent of the total supply of BLAST was airdropped to users as part of the TGE.

Ethena

Ethena, which disrupted the decentralized finance space with the arrival of its unconventional synthetic dollar, USDe, launched a TGE of its own on April 2, 2024. The project airdropped 750 million of its governance token ENA to holders of “shards”, which were rewarded to users for completing various activities in the Ethena ecosystem.

The final word

Token generation events are a significant moment in a project's roadmap, being a potential catalyst for wider adoption, deeper token liquidity, and possibly, raising funds. TGEs also often reward users who got into a project early and pledged their loyalty to help the ecosystem grow. That's why TGEs often attract plenty of attention from the crypto community, as they often signify the next step forward for a project. If you're interested in one or a number of crypto projects and believe in their long-term prospects, it's worth keeping an eye out for future TGEs as a potential opportunity to become involved and support the project's growth.

Interested in learning more about the inner workings of digital assets and their purpose? If so, check out our guide on how to make your own memecoin, or our article explaining what a governance token is.