TGE is the beginning of a new life cycle for a crypto project: we analyze all the nuances

When a crypto project prepares to launch its own token, it signifies a key moment — the generation of tokens (TGE). This event is often confused with the initial coin offering (ICO), although there is a fundamental difference between them. Let’s understand why TGE is such an important process, how it works in practice, and what to pay attention to before participating.

How Token Generation Actually Works

TGE is not just the issuance of digital assets; it involves creating utility tokens that are received by qualified users and early ecosystem participants. Unlike coins, utility tokens are intended for governance, interaction within the system, and activity incentives. They operate through smart contracts, which allows programming their functionality for specific project tasks.

When a project conducts token generation, it expands access to its ecosystem and provides users with a tool for participation. This can happen in several ways: through airdrops for active users, distribution among early investors, or staking mechanics. Each method has its own goal — encouraging activity, expanding the community, or increasing liquidity.

Main Difference: TGE is Not ICO

Although both processes involve the issuance of digital assets, their purposes differ radically. An ICO is a fundraising mechanism where a project sells tokens to investors to raise funds. TGE is usually the distribution of a ready utility token among users without a mandatory sale.

Additionally, ICOs often attract regulatory scrutiny, as coins can be considered securities. TGE, in most cases, aims to avoid such classification by demonstrating that the token is a utility tool, not an investment asset. Many projects deliberately choose token generation over ICO for this reason.

Why Projects Conduct TGE

Engaging and incentivizing users

Token generation is a powerful tool for attracting attention. A project may already have a core group of active users, but launching a TGE motivates new people to join. Distributing tokens gives users a real resource for governance and benefits. If staking logic is embedded in the smart contract, holders can earn rewards, multiplying their assets.

Building community and development

TGE is a stage that attracts both new users and developers. A strong community is the foundation of any project’s success. New members can contribute to innovation, point out flaws, and help develop the ecosystem. Interest in the token generation event often creates a wave of attention in the crypto community, positively impacting organic growth.

Improving liquidity and accessibility

When tokens obtained through TGE start trading on cryptocurrency exchanges, their liquidity significantly increases. High liquidity means the price becomes more stable, as there are enough buyers and sellers willing to make deals. TGE addresses the issue of tokens being too thinly traded on the market.

Raising capital for development

Although TGE is not exactly an ICO, some projects use this strategy to attract investments. Through distribution mechanics and subsequent trading, a project can raise funds for development. Using blockchain makes this process fast and transparent.

Real Examples: Uniswap, Blast, and Ethena

Uniswap and the UNI token (price: $5.39)

Uniswap is a decentralized exchange that operated without a token management from 2018 to 2020. In September 2020, the project conducted a TGE, releasing one billion UNI tokens. These tokens were planned to be distributed over four years until September 2024. The token generation coincided with the launch of a liquidity mining program, where participants received UNI rewards for using their assets in four trading pairs. This was a classic example of TGE used to simultaneously incentivize users and create initial liquidity.

Blast: Ethereum layer 2 solution (price: $0.00)

Blast is a layer 2 solution for Ethereum that launched a TGE on June 26, 2024. Interestingly, the BLAST token was pre-created and deployed on the mainnet four days before the event. Distribution occurred via airdrop to users who transferred Ether or USDB into the network, as well as those interacting with decentralized applications. Participants in token generation received 17% of the total supply. This case demonstrated how TGE can be used to reward already active network participants.

Ethena and the ENA token (price: $0.23)

Ethena is a project that revolutionized the decentralized finance space by introducing the synthetic stablecoin USDe. The ENA token generation took place on April 2, 2024. An interesting point: only shard holders — special NFTs received for activity within the ecosystem — participated in the airdrop. A total of 750 million ENA governance tokens were distributed. This example showed how TGE can be linked to previous user incentive systems.

How to Evaluate TGE Before Participating

Start with the project documentation

Any research begins with studying the technical documentation and whitepaper. These describe the project’s goals, core functions, main technology, roadmap, team composition, and tokenomics. This will give you an idea of where the project stands in the Web3 space and what contribution it makes to the ecosystem.

Study the team and founders

The experience and professional competence of the founders directly influence the project’s success. Look for information about their previous projects, achievements, and reputation in the crypto community. What specialists have they involved to implement their idea? Answers will help assess the realism of their plans.

Check activity in communities

(Twitter) and Telegram channels of the project provide an objective picture of user and developer opinions. Active and constructive discussion in these communities indicates a healthy ecosystem. Pay attention to the quality of questions and responses from the team — this can tell a lot about the project’s competence.

Analyze competition and risks

Familiarize yourself with the legal situation in the countries where the project operates and compliance requirements. Study competitors and understand what unique advantage the project has. Identify main risks, including rug pull risk, where organizers could suddenly close positions and disappear with capital.

Key Takeaways About Token Generation

TGE is not just a technical event; it’s a pivotal moment in the development of a crypto project. Token generation serves to incentivize participation, expand the community, increase liquidity, and sometimes raise capital. Unlike ICOs, TGE is mostly the distribution of ready utility tokens rather than the sale of investment assets.

Examples like Uniswap, Blast, and Ethena demonstrate the variety of approaches to conducting TGE and their effectiveness in achieving project goals. However, before participating, thorough research is essential — studying documentation, team, community, and risks.

If you believe in the long-term potential of a project, TGE is a real opportunity to become an early participant and support its development. But remember — there are no guarantees in cryptocurrencies, and all decisions should be made based on your own analysis.