The acronym TGE stands for Token Generation Event, which represents the moment when, for the first time, a token is generated on its blockchain and made available to the public.
The introduction of new models of public crypto-asset offerings, either as a means of addressing some of the ICO concerns or a mechanism of issuance specialization, could be the reason for the decline in the number and volume of ICOs after 2018. A new model called a Token Generation Event (TGE) is a novel paradigm that focuses primarily on utility tokens. TGE is the period during which tokens are issued by a blockchain start-up and made available to the public (for instance, via initial coin offerings). These tokens are designed with utility in mind and initially only represent a small portion of the finished product. Although it lacks a value store of its own, it is designed so that applications may be built around it.
One must comprehend the fundamentals of tokens in order to comprehend what a token generation event is. This article will explain various types of tokens and the significance of Initial Coin Offering (ICO), Initial Public Offering (IPO), and Token Generation Event (TGE).
Types of Tokens
A token is a digital rendition of a utility or an asset on a blockchain network to be used in a decentralized app (DApp). A token generation event is when a DApp developer publicly releases these tokens into the market. Tokens are programmable and usually represent an asset or utility. Tokens are tradable and run on a smart contract system that allows them to take any form of goods, reward points, or virtual characters from video games.
A token generated using a smart contract has a variety of roles and uses ranging from voting rights, exchanging value, access to premium services, currency transactions, and distribution earnings to begin with. Tokens also allow the governance of specific decentralized finance projects, which makes it possible to create communities of users, ensuring the evolution of the project over time.
Platform tokens are designed to support a decentralized application on the blockchain. For example, The Uniswap platform, which provides liquidity to automated market makers (AMM), has its own native token, UNI. It is a decentralized application allowing users to exchange different tokens created on ethereum blockchain with other Ethereum blockchain based tokens through smart contracts. UNI is Uniswap's governance token as well, i.e., the more UNI tokens you own on the network, the more voting power you will have over protocol-related choices. Platform tokens acquire increased security and the capacity to facilitate transactional activity from the blockchains built atop.
Security tokens represent ownership of assets such as gold. For example, let us say you want to buy gold but do not want to physically store it. Someone could create a token whose value would change based on the price of real gold. So instead of holding the gold, you own a representation of it by owning its token. The tokens are supposed to be much safer, as it is much more difficult to hack a blockchain token than to break into someone's home. However, the problem is that there has to be an actual asset corresponding to the token you own. A fraudster could create a token and ask people to invest in it without having real gold.
When a security token, like a share of stock, denotes ownership of an off-chain asset like real estate, payable bills, or a company, the value of the security token is directly correlated with the asset's worth; the more valuable the asset, the more valuable the token or vice-versa.
Transaction tokens are used for transactions that act as units of account and are traded for products and services. They often work like traditional currencies but, in some cases, can offer additional benefits. For instance, users can carry out transactions using stablecoins like Dai without using a traditional intermediary or central authority, such as a bank or payment gateway. Furthermore, Dai offers transactional performance to other networks and serves as a medium of exchange. For example, POA Network developed xDai, a Dai-like transactional token that resides on a sidechain and enables quick, low-cost transactions than traditional systems like banks or Paypal.
On the blockchain, utility tokens are incorporated into a pre-existing protocol that is utilized to access its services. Unlike security tokens, they are not intended for direct investment but can be used to pay for services within the respective ecosystems. A platform and a utility token operate together synergistically because the platform offers protection for the security token. In contrast, the token generates the network activity required to support the platform's economy.
Non-fungible tokens (NFT)
NFTs are unique (non-fungible), cannot be exchanged for an identical item, and represent ownership of individual items such as digital art. Think of them as a certificate of authenticity when discussing artwork on the internet.
Governance tokens allow token holders to vote on specific matters, such as the future of a protocol or decentralized application. DeFi protocols are generally decentralized and have no board or central authority, which makes tokens extremely useful if significant decisions are needed. The UNI token of the Uniswap protocol is an example of a governance token.
For instance, UNI token holders could choose to increase the fees of the Uniswap exchange from 0.3% to 0.7%, and all token holders would be allowed to vote on this issue. However, the voting power of a person depends upon the number of tokens they own. This is a great reason to own many tokens, as it will give you more control over the platform, but it also opens up the debate about whether such entities are centralized or decentralized.
ICOs, IPOs, and TGEs
An initial coin offering (ICO) is derived from an initial public offering (IPO) or Takeover bid. IPO refers to an event when a company publicly offers shares (either held by its existing shareholders or newly issued) on the financial markets. During an IPO, the company's securities are sold, while in the case of an ICO, tokens of different categories (utility, security, governance, NFT, platform or transaction tokens) are issued.
In both cases, the goal is to increase the initial capital. However, IPO is an established method of raising funds via a public sale, whereas the ICO is deemed to be illegal if and when the project and coin don't pass the Howey Test that is prominently used by the U.S. Securities and Exchange Commission (SEC) to determine if an offering is an investment instrument. Investors should also be warned that, in some cases, they make a "donation" without their knowledge and that no rights are included in the token. This can occur during Token Generating Events (TGEs) or Events generating tokens, which do not constitute an "offer" in the legal sense of the term: TGEs do not promise the delivery of a result in return.
Token launch through TGE helps blockchain businesses raise funds from the public through ICO, private, or public sales. Two primary goals of a token generation event include generating a token and launching it on crypto exchanges and websites to keep the investor communities updated about a new blockchain-based project. Early support of a cryptocurrency project demonstrates your confidence and understanding of its limitless potential, and early investors are rewarded through voting rights, airdrops, and access to restricted and discounted goods and services.
The Indigo DAO Token (INDY), which enables on-chain voting on DAO proposals following the Indigo DAO Constitution and Voting Procedures, is a recent example of a token generation event on the Cardano blockchain. The Indigo token is equally distributed to users over an extended period of time, plays a crucial part in the Indigo Protocol, and gives token holders control over the protocol's future.During the event, the protocol airdropped 350,000 INDY to members of the Indigo community.
Steps to launch a token generation event
Create a product
While conducting a token generation event, creating a product is the first step, i.e., you must have a product that utilizes your token before continuing. You can create a blockchain-based product by seeking the advice of a qualified blockchain advisor. Also, consider hiring a legal advisor who will let you know if your product is compliant with the regulations in your jurisdiction.
Prepare your whitepaper
An essential marketing tool for your token-generating event is a whitepaper. The document outlines the market issue and how you intend to use blockchain technology to address it. The project goals, team, roadmap, token distribution percentages, and legal facets of your business are the key contents of the whitepaper.
Develop a community
If you build a supporter base, your token sale marketing will prosper. Therefore, develop a community to help you sell the project and generate buzz about it. Discord, Slack, Telegram, and Twitter are specialized platforms where a crypto community can spread the news about the product. However, once you establish a community, it's crucial to manage it by continuously maintaining engagement.
Contact exchanges for token listing
When you are ready for a token-generating event, one of the most effective ways to generate the most leads is to get in touch with various exchanges to list your token to trade on the open market. In general, it is advantageous if your token is listed on reputable exchanges.
The expression "Initial Coin Offering" implies the creation of a coin as a means of raising money. However, not all fundraising takes place to raise funds from stakeholders. It is for this reason that the term "Token Generation Event" is widely used. The more the token investor community gets involved, the more successful the TGE will likely be. Investors who HODL (Hold On for Dear Life) their coins, tokens, or digital assets at a nascent stage reap increased profits. Supporting a crypto project at an early stage integrates trust and uncapped potential for investors. However, conducting due diligence before making an investing decision helps protect against any losses that may occur.