ICOs used to be the main way to raise funds, but legal risks made them less popular. Now, many projects choose TGE because it offers more flexibility and fewer regulatory issues. Beyond fundraising, TGE also helps build a community and ensures tokens can be traded or used right away.
This article explains what a TGE is, how it works, and what to consider before joining one.
What is a Token Generation Event (TGE)?
A Token Generation Event (TGE) is a crypto crowdfunding method for crypto projects to launch new tokens (governance tokens or utility tokens). It allows both individual and institutional investors to buy project's tokens before they become publicly tradable.
Unlike traditional fundraising, where companies seek venture capital or issue stocks, a TGE enables projects to secure funding by selling digital tokens.
TGE vs ICO vs IEO vs IDO: What’s the difference?
There are several ways for crypto projects to launch and raise funds, with TGE (Token Generation Event), ICO (Initial Coin Offering), IEO (Initial Exchange Offering), and IDO (Initial DEX Offering) being the most common. While they all involve selling tokens, each method works differently.
1. TGE (Token Generation Event)
A TGE is the process of creating and distributing tokens, which may happen through different fundraising methods, including ICOs, IEOs, or IDOs. The difference is TGE include different investment stages for investment firms before the tokens are launched for ICO, IEO and IDO. TGE focuses on both raising funds and launching the token for use within the project’s ecosystem.
2. ICO (Initial Coin Offering)
An ICO is the earliest and most well-known fundraising method in crypto. It allows investors to buy tokens before they are publicly available. However, due to regulatory concerns because ICO name is close to IPO in the stock market, ICO term is used less often. And it often imply for security token.
3. IEO (Initial Exchange Offering)
An IEO is an ICO but it's hosted on a centralized exchange (CEX) such as Binance Launchpad. The exchange conducts due diligence on the project before listing the token, giving it more credibility than an ICO.
4. IDO (Initial DEX Offering)
An IDO is an ICO but the token sale happens on a decentralized exchange (DEX) instead of a centralized exchange, such as Pancake Swap. This means there is no middleman, and anyone can participate as long as they have a compatible crypto wallet.
How does a Token Generation Event work?
A Token Generation Event (TGE) follows a structured process to raise funds and distribute tokens. While each project may have slight variations, the general steps include:
1. Preparing the project
Before launching a TGE, the project team develops a whitepaper—a document outlining the project’s vision, technology, use case, and tokenomics. This document helps investors understand the potential value of the token. The team also builds a community through social media, forums, and marketing campaigns to generate interest.
2. Token sale rounds
A TGE usually happens in multiple rounds, each with different pricing and conditions:
- Seed Round: The earliest stage, where large investors and venture capital firms buy tokens at the lowest price. These tokens are often locked for a period.
- Private Sale: A limited sale for smaller institutional investors and early supporters. Prices are higher than in the seed round but still lower than the public sale.
- Public Sale: The final stage, where the general public can buy tokens. These tokens are usually unlocked and tradable immediately.
3. Token distribution and listing
Once the sale ends, investors receive their tokens based on the terms set by the project. Most tokens have vesting schedules, meaning they are released gradually to prevent price manipulation.
To increase liquidity and accessibility, projects often list their tokens on decentralized exchanges (DEXs) or centralized exchanges (CEXs). This allows investors to buy, sell, and trade the token freely.
A well-executed TGE ensures that the token has a strong market presence, liquidity, and a growing community, all of which are key factors in its success.
What are the different stages of a TGE?
A Token Generation Event (TGE) typically happens in multiple stages. Early rounds offer lower prices and longer lock-up periods. The later rounds focus on wider community participation. These stages help projects gradually raise funds while building demand and liquidity for the token.
1. Seed round
The Seed Round is the first stage of a TGE, where the project raises initial funding from large investors, such as venture capital firms and strategic partners. This round is crucial for getting the project off the ground.
Investors in the Seed Round typically buy tokens at the lowest price, but these tokens are often locked for a set period. This prevents immediate selling and helps stabilize the project’s early growth. In exchange for the lower price, investors take on higher risks since the project is still in its early stages.
The funds raised in this round are used to develop the project’s technology, expand the team, and prepare for the next funding phases.
2. Private round
The Private Round follows the Seed Round and is open to a broader group of investors, including smaller venture capital firms, crypto funds, and select private investors. Tokens in this round are usually priced higher than in the Seed Round but still lower than in the Public Sale.
Unlike the Seed Round, tokens in the Private Round often have shorter lock-up periods or may even be unlocked immediately after listing, depending on the project’s strategy.
The goal of this round is to bring in additional funding while expanding investor interest before the public launch.
3. Public sales
The Public Sale is the final stage of a TGE, where tokens are made available to the general public. Unlike the previous rounds, this phase is open to anyone, including retail investors who want to buy tokens before they hit the market.
At this stage, tokens are usually sold at their highest pre-market price, reflecting the project’s increased visibility and demand. Unlike the Seed and Private Rounds, tokens in the Public Sale are often unlocked immediately, meaning investors can trade them as soon as they are listed on an exchange.
The Public Sale is crucial for the project's success. A strong public sale not only raises the remaining funds needed but also helps establish an active community of token holders. Once the sale ends, the token is typically listed on decentralized (DEX) and centralized exchanges (CEX), allowing open-market trading.
Why is a TGE important for crypto projects?
A Token Generation Event (TGE) is more than just a fundraising tool—it’s a critical step in launching and growing a crypto project. By distributing tokens, projects secure funding, attract investors, and build an engaged community. Here’s why TGE plays a vital role in the success of a crypto project:
1. A fundraising method with fewer legal risks
Many projects now choose TGE over Initial Coin Offerings (ICOs) to avoid legal complications. Unlike ICOs, which are often classified as securities and face strict regulations, TGEs typically issue utility tokens rather than investment promises. This makes it a safer and more flexible way to raise funds while staying compliant with evolving crypto laws.
2. Builds a strong investor and user community
A successful TGE attracts investors and early adopters who believe in the project’s vision. Since token holders benefit from the project’s growth, they often become active supporters—helping with marketing, testing, and providing feedback. This community-driven model increases engagement and adoption.
3. Ensures liquidity and market presence
After a TGE, projects often list their tokens on decentralized (DEX) and centralized exchanges (CEX). This makes the token tradable, creating liquidity and allowing investors to buy, sell, or use the token within the project’s ecosystem. Without a well-planned TGE, tokens may struggle to gain market traction.
4. Boosts project visibility and credibility
A well-executed TGE generates buzz in the crypto space. The marketing campaigns, partnerships, and exchange listings that come with it help establish credibility. Investors and users are more likely to trust and support a project that has a transparent TGE process.
Pros and cons of participating in a TGE
A Token Generation Event (TGE) can be a great opportunity for investors, but it also comes with risks. Understanding the benefits and drawbacks helps you make informed decisions before investing.
Pros
1. Access to early investment opportunities: Investors in early TGE rounds often buy tokens at lower prices, giving them a chance to profit if the project succeeds and the token's value increases.
2. Global participation: Unlike traditional fundraising, TGEs are open to investors worldwide. Anyone with an internet connection and a crypto wallet can participate, making it easier for projects to attract funding.
3. Liquidity and trading potential: Many tokens are listed on exchanges soon after the TGE, allowing investors to trade them. This provides liquidity and the possibility of quick returns.
4. Supports innovative projects: By participating in a TGE, investors help fund new technologies and blockchain projects. This can lead to industry growth and the development of useful decentralized applications.
Cons
1. Regulatory uncertainty: Crypto regulations are still evolving, and some TGEs may face legal challenges. Investors could lose access to their funds if a project is shut down due to compliance issues.
2. High risk and volatility: The value of newly launched tokens can be extremely volatile. Many projects fail, and investors risk losing most or all of their money.
3. Potential for fraudulent projects: The crypto space has seen many fraudulent TGEs, where teams raise capital and disappear. Without proper research, investors can fall victim to scams.
4. Lack of investor protection: Unlike traditional investments, TGEs offer little to no protection for investors. If a project fails or turns out to be a scam, recovering lost funds is often impossible.
FAQ
What are the key differences between TGEs and ICOs?
A Token Generation Event (TGE) focuses on the creation and initial distribution of tokens, usually when the product is live or close to launch. An Initial Coin Offering (ICO) often happens earlier—raising funds based on a whitepaper or concept. TGEs tend to be more compliant with regulations, while ICOs were mostly unregulated. TGEs are considered a more mature, product-ready version of token fundraising.
How does a TGE contribute to community building for a blockchain project?
A TGE allows early supporters to get involved by owning tokens, creating a sense of shared ownership. These tokens often grant access, voting rights, or rewards, which encourage participation. A well-executed TGE builds trust by showing progress and transparency. This can attract long-term users who are invested in the success of the project.
How do TGEs ensure the security of token distribution?
Token Generation Events (TGEs) ensure security by using audited smart contracts that automatically handle token distribution. These contracts eliminate manual interference and reduce the risk of fraud. Many projects also use vesting schedules to prevent early investors from dumping large amounts of tokens. In some cases, TGEs require Know Your Customer (KYC) verification to block suspicious participants.
