What is TGE? From the Concept to the Working Mechanism of the Token Generation Event

Historical Context: From ICO to TGE

To understand what TGE is, we need to go back to 2014 when Ethereum was just launched. At that time, the method of raising funds from the community through blockchain called Initial Coin Offering (ICO - Initial Coin Offering) began to gain popularity. ICOs during those years mainly focused on the issuance of native coins - that is, coins built specifically for a particular blockchain network.

However, as Ethereum developed strongly, thousands of projects began to launch ERC-20 tokens through ICO events. This marked the transition from issuing native coins to issuing tokens. In 2017, during the altcoin boom, ICOs became extremely popular as thousands of tokens were generated on the Ethereum blockchain in a short period.

However, in the following years, ICO gradually lost its competitiveness as both the investor community and projects shifted to prefer new forms such as IEO (Initial Exchange Offering) - directly issuing tokens through cryptocurrency exchanges.

What is Token Creation Event (TGE)?

Token Generation Event (TGE - Token Generation Event) is a method of fundraising from the community that blockchain projects use to initiate their own cryptocurrency. This is a way for startups to gain support from early supporters before officially launching their token to the market.

Unlike the broad concept of ICO, TGE is usually used to issue utility tokens - digital assets directly linked to a specific decentralized product, service, or application (DApp). For example, utility tokens can grant access to subscription services, decentralized cloud storage, or voting systems within a platform.

The important point is that utility tokens are often not considered securities because they have practical applications and specific uses, rather than being purely investment tools.

TGE vs ICO: The Differences You Need to Know

At first glance, TGE and ICO seem similar as both are methods of crowdfunding. However, the difference lies in their purpose and nature:

• ICO is often associated with the issuance of tokens that have the characteristics of securities, meaning that these tokens primarily serve as investment instruments. This can lead to management issues because tokens considered as securities must comply with strict legal regulations.

• TGE focuses on the issuance of utility tokens, which are tokens with real-world applications within an ecosystem. Due to this distinction, TGE often faces less regulatory pressure from relevant authorities.

For that reason, although many ICOs also issue tokens, some experts consider ICOs to be a type of TGE when it is accompanied by the issuance of utility tokens.

Benefits of Participating in TGE

1. Global Access Opportunity

TGE allows projects to attract support from participants all over the world without being restricted by geographical boundaries or local regulations.

2. Raising Funds from Decentralized Community

Instead of relying on traditional fundraising methods such as banks or venture capitalists, TGE offers an independent way to raise funds directly from the community.

3. Expanding Opportunities for Innovators

Not only projects supported by large funds have the opportunity to develop. TGE democratizes the ability to initiate, allowing creative ideas worldwide to be realized through decentralized applications and platforms.

4. Enhance Fundraising Efficiency

Blockchain technology simplifies the entire token issuance process, reduces intermediary costs, and accelerates execution speed.

5. Democratic Participation for Everyone

TGE opens its doors to all types of investors - from newcomers to the crypto world to seasoned investors - providing an opportunity to participate in early-stage projects.

The Potential Risks of TGE

1. Lack of Supervision and Control

The uncontrolled nature of TGE creates loopholes for fraud and scams. Anyone can create a TGE, which means investors must conduct sufficient due diligence before investing.

2. Token Price Fluctuates Dramatically

The value of tokens can fluctuate wildly in the unpredictable cryptocurrency market. Unprepared investors may face significant losses.

3. Projects May Not Be Able to Fulfill Commitments

Some projects released through TGE may not achieve the goals they promised when raising funds, leading to financial loss risks for investors.

4. The Risks of Cybersecurity

The TGE platform can become a target for cyber attacks. Hackers can exploit vulnerabilities in the system to steal money or personal information from users.

5. Rug Pull Scam Groups

There have been many cases where TGE organizing groups fled with investors' money after successfully raising funds. Verifying the identity and credibility of the project team is a step that cannot be overlooked.

Conclusion

The token creation event (TGE) is an effective method for blockchain projects to raise funds by issuing utility tokens. Although TGE offers significant benefits such as global accessibility, opportunities for decentralized fundraising, and empowering innovators, it also comes with considerable risks.

The lack of oversight, market volatility, risks related to the feasibility of the project, security threats, and “rug pull” scams are factors that any potential investor must carefully consider before deciding to participate in any token creation events.