What is TGE in cryptocurrency? What is the difference between ICO? Explain this article in detail

What is Token Generation Activity (TGE)

Token Generation Activity (TGE) is a crowdfunding mechanism adopted by blockchain projects or companies to raise funds. Through TGE, projects can issue new crypto tokens and attract the attention and support of early users.

This term usually covers various token offerings and financing activities, especially in the issuance scenarios of utility tokens. The so-called utility token is a digital asset linked to specific products, services or decentralized applications (DApp) functions, used to access platform functions or participate in ecological governance.

To understand TGE's operating logic in depth, we can go back to the early financing model of "initial token issuance" (ICO), which was popular in the crypto circle from 2014 to early 2018.

Initial Token Issuance (ICO)

In the early stages of crypto development, initial token issuance (ICO) is a mainstream blockchain financing method. In 2014, Ethereum successfully raised development funds through ICO, which promoted the popularization of this model. By 2017, with the "alliance coins" boom, thousands of ERC-20 token projects emerged on the Ethereum platform.

From the original definition, ICO is mainly used to issue native cryptocurrencies based on self-built blockchains. However, with the growth of the Ethereum ecosystem, many projects have turned to use their platforms to issue tokens. Although these tokens are called "ICOs", they are not native assets on-chain.

Over time, "ICO" gradually evolved into a general term that generally refers to all token issuance activities. However, with the development of the market, new financing methods such as initial exchange issuance (IEO), and project parties and investors have begun to turn to a more endorsed model, causing the popularity of traditional ICOs to decline year by year.

ICO vs. TGE

TGE and ICO are often used in conjunction, but there are actually certain differences. Although the two goals are the same - that is, to raise funds for projects and distribute tokens, the focus is different.

TGE emphasizes the creation and issuance of utility tokens. These tokens are usually bound to specific application scenarios, such as accessing decentralized services, participating in governance voting or subscription functions, so they are mostly not considered securities. In contrast, ICOs have frequently involved in the issuance of tokens with strong securities attributes, which can easily arouse the attention and scrutiny of regulators.

In addition, as the market matures, TGE covers a wider range of issuance forms, including IEO, IDO (first decentralized issuance) and even fair issuance based on on-chain mechanisms, while ICOs point more to early threshold-free and lack of supervision financing practices.

Pros and cons of Token Generation Activities (TGE)

advantage

1. Global accessibility: Any user with an internet connection can participate in TGE, allowing the project to quickly reach global supporters.

2. Decentralized crowdfunding: reduces dependence on traditional venture capital or financial institutions, and gives startup teams greater autonomy.

3. Innovation opportunities: Provide developers and entrepreneurs with funds and community foundation to implement their creativity, and promote the development of decentralized technology.

4. Financing efficiency: Use smart contracts to automatically perform token allocation, simplify the process, and reduce issuance costs and time.

5. Everyone can participate: Compared with the high threshold of traditional financing, TGE gives more ordinary users the opportunity to support early-stage projects and share growth dividends.

shortcoming

1. Regulatory uncertainty: Most TGEs are in a regulatory gray area, with compliance risks, and investors are vulnerable to fraudulent projects.

2. Market volatility: The price of tokens may fluctuate violently after they are listed, especially in low-liquid markets, where speculation increases risks.

3. Project feasibility: Some projects are financed only based on white papers and concepts, and subsequent development has stagnated, resulting in the token value returning to zero.

4. Security vulnerability: If the smart contract code is defective, or the issuing platform is attacked, it may lead to loss of funds.

5. Team credibility: There is a "Rug Pull" scam, that is, the team disappears after raising funds, leaving investors losing all their money.

in conclusion

To sum up, token generation activity (TGE) is the core way for current blockchain projects to issue utility tokens and realize decentralized financing. It breaks down regional and capital barriers and provides a new path for technological innovation. However, models such as high circulation premium and low initial supply (Low Float/High FDV) also exposed problems such as opaque private equity pricing and excessive market makers' dependence.

With the exploration of DeFi native issuance mechanisms (such as joint curve models), and new forms such as Pre-TGE and integral screening launched by platforms such as Binance, TGE is evolving towards a more fair, transparent and sustainable direction. Despite this, investors still need to remain vigilant and conduct in-depth research on project background, token economic model and team credibility to cope with potential risks.

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