Token Generation Event vs. Initial Coin Offering: Their Similarities and Differences

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BLOCK6

4 min readMay 31, 2022

In the crypto world, the terms coin and token are frequently used interchangeably. One of the growing pains of today’s decentralized web is that the vocabulary is still a work in progress.

Token Generation Events, a riff on the ICO fundraising model, are either adding to or potentially clearing up the confusion. But are they a necessary evolution in the way projects raise funds, or simply a new way to sell old rope? We’ll discover the truth.

But first, a few points must be clarified.

What are Crypto Coins?

Coins have been widely regarded as a new form of investment, despite the fact that their value is based on an extremely volatile and largely unregulated market. Coins are primarily used to store value as it relates to a specific company.

Bitcoin is the most widely used coin in the market. It is a type of digital currency capable of storing and exchanging value that is entirely based on the blockchain.

What are Crypto Tokens?

Tokens, on the other hand, are assets or utilities that sit on top of a specific blockchain, typically the more programmable and adaptable Ethereum.

Tokens are tradable commodities, loyalty points, or gaming avatars that are generated by a smart contract system.

They have many of the same properties as coins, but they are mutually exclusive. Tokens operate on a smart contract system, making them far more programmable and functional than a coin.

A token can fulfill a variety of roles that include;

Voting power
Access to premium services
Distribution earnings
Exchanging value

TGE versus ICO

Depending on what a company wants to accomplish, they can choose between an ICO and a Token Generation Event, also known as a token launch.

The majority of services that run on the Bitcoin blockchain deal with coins, whereas most dApps that run on the Ethereum blockchain deal with tokens.

While they all serve the same purpose — a way to crowdfund and bootstrap a project — companies are wary of communicating their specific offerings for fear of fines and regulation.

What is a Token Generation Event?

A Token Generation Event is essentially the creation of tokens by a company that works in the utility market and runs on the Ethereum blockchain. Token Generation Events, or TGEs, are used instead of ICOs to describe these types of token sales because they are effectively little slices of a product.

The most important factor to remember is that funds raised through token generating activities are not taxable. They aren’t considered to be security assets. On the other hand, regulatory organizations have been increasingly strict with regard to ICOs as securities, making them taxable. One of the main drivers for the adoption of cryptocurrency token creation events is this.

The second most popular motive is for publicity and marketing. A token creation event can help crypto projects reach a much larger audience than they might have otherwise.

TGE announcements keep investor communities informed and excited about a new project’s token production and launch process, generating buzz and growing investor interest.

What is an Initial Coin Offering?

An Initial Coin Offering (ICO), often known as a public sale, is a fundraising strategy utilized by blockchain initiatives that is inspired by Initial Public Offerings (IPOs). Institutional and ordinary investors can buy tokens instead of stocks in an ICO. These investors can participate in the sale using fiat currency or other digital currencies.

Interested investors can purchase a new cryptocurrency token produced by the company through an initial coin offering. This token may have some utility in relation to the company’s product or service, or it may simply represent a stake in the company or project.

Some ICOs have provided investors with enormous returns. Several others have proven to be bogus or have fared dreadfully.

To take part in an ICO, you’ll often need to buy a more established digital currency and have a basic understanding of cryptocurrency wallets and exchanges.

Because ICOs are largely unregulated, investors must proceed with extreme caution and diligence while studying and investing in them.

Conclusion

As cryptocurrencies grow in popularity as a means of making payments, transferring money, investing in assets, and holding value, it’s crucial to know what the industry’s prevalent phrases, trends, and acronyms represent. Now you understand the significance of token generation events and why most successful crypto ventures plan and launch around them. It’s a great way to boost a token’s success and popularity, resulting in additional investors and inevitable price increases.