What is TGE and what do you need to know before participating in token distribution

Common Mistakes Beginners Make When Choosing Cryptocurrency Projects

Before participating in a new token launch, most investors face confusion. People often mix up asset allocation concepts with initial offerings, misunderstand the true goals of projects, and overlook critical evaluation factors. This information gap can cost money. Let’s understand how the mechanism works, the real differences between approaches, and how to properly analyze upcoming market events.

What is Hidden Behind the Abbreviation TGE: Basic Definition

TGE (Token Generation Event) — is the process of creating and issuing digital assets by a blockchain project for a broad user base. Unlike other forms of attracting attention, such issuance is focused on utility tokens that provide access to the ecosystem’s functions.

Tokens created during such an event typically operate via smart contracts and can be configured for various tasks: governance voting, internal payments, staking with rewards. Most decentralized applications are built precisely on such assets.

Token Generation and Initial Offering: Where is the Line?

There is often confusion between TGE and ICO, although the differences are significant:

Distribution of Utility Tokens (TGE)

• Focus on functional capabilities within the ecosystem
• Provides users with tools and governance rights
• Chosen by projects for legal status (token ≠ security)

Initial Public Offering (ICO)

• Main goal — fundraising for development
• Often attracts regulatory attention
• Can be considered a securities offering

Projects often prefer to use the first approach to avoid legal complications and regulatory pressure.

Why Do Projects Launch Asset Distribution

Attracting a Critical Mass of Participants

Even promising projects need a community. Token issuance makes participation tangible: users gain resources for interaction, the ability to influence development through voting, and chances to earn income via staking and other mechanisms.

Asset holders often receive privileges depending on the amount of tokens held — from voting rights to shares in rewards.

Expanding the User Base

Announcement of an upcoming event attracts new participants, developers, analysts. A healthy community is the key to innovation and potential value growth. New ideas and improvements often come from an expanded active user base.

Improving Liquidity and Trading Accessibility

When tokens start trading on exchanges, liquidity sharply increases. Stable demand and supply help establish a fair price and prevent extreme fluctuations.

Mobilizing Capital for Scaling

Although the main goal is not fundraising, a side effect often occurs: investors buy tokens, and these resources support the project’s development and its ecosystem.

How Not to Make Mistakes: Evaluation Criteria Before Participating

Start with the project’s white paper

This is the primary source of information: it describes the objectives, technology, roadmap, team composition, and tokenomics model. A good white paper indicates the project’s place in the Web3 landscape and its specific contribution.

Check the founders’ experience

A team with proven success in the industry usually handles promises better. Look for answers: do the creators have successful projects? Who else have they involved?

Observe community reactions

On platforms X and in Telegram groups, you can find objective opinions from developers and users. Activity, constructive criticism, and serious questions indicate a healthy community.

Study the competitive environment and risks

Understand the legal requirements around the project and the industry as a whole. Identify main competitors and their advantages. This will help realistically assess prospects.

Real Cases from Cryptocurrency History

Uniswap (UNI) — the default of decentralized trading

Decentralized exchange launched in 2018. In September 2020, it released the governance token UNI. One billion tokens were created for distribution over four years until September 2024. With the UNI release (current price: $5.45), holders gained voting rights in platform governance. Simultaneously, a liquidity reward program was launched, where participants received UNI for using assets in selected pools.

Blast (BLAST) — Layer-2 solution for Ethereum

Layer-2 solution conducted token distribution on June 26, 2024. Four months prior, BLAST was pre-created on the main network and sent to users who transferred Ether or USDB into the network and interacted with decentralized applications on the platform. Participants received 17% of the total BLAST (current price: $0.00).

Ethena (ENA) — synthetic dollar for DeFi

A project that transformed decentralized finance with its stabilized asset USDe launched governance token distribution ENA on April 2, 2024. 750 million tokens were distributed to holders of special shards earned through activity in the ecosystem. The current ENA price is $0.23.

Main Risk: How to Avoid Falling for Fraud

The rug pull scheme remains the most common: creators issue tokens, pump the price through activity, then abruptly close positions and disappear with profits, leaving other holders with worthless tokens.

Protection is simple but requires time:

• Deep project research
• Checking the team’s history
• Analyzing current community activity
• Studying legal and regulatory situations

Common Questions Investors Ask

Is guaranteed income from participation possible? No. The cryptocurrency market does not offer guarantees. Events are usually conducted to strengthen the ecosystem, not to generate profit. All income is hypothetical and depends on many external factors.

Why don’t all projects conduct distributions? Not all need tokens to operate. However, most modern projects use tokenization, so they require such events or initial offerings.

Is the issuance really different from an initial offering? Yes, significantly. The first approach focuses on utility functions and governance, the second on raising investments. This difference is critical for legal status.

Final Conclusions

Token distribution is a critical moment in the development of a crypto project. It can be a turning point for attracting users, increasing liquidity, and strengthening the ecosystem. In many cases, it’s a reward for early supporters who have backed the project from the start.

For those who believe in the long-term potential of certain projects, it’s important to closely follow upcoming events. It’s an opportunity not just to receive tokens but to actively participate in the growth of a promising platform.

The main rule for investors in this space: conduct your own research, ask critical questions, and never invest in projects you do not fully understand.