Token Generation (TGE) — is the issuance of governance: how digital asset distribution works

Token generation is the creation and distribution of utility digital assets by a crypto project among ecosystem participants. In short, TGE is the process of launching tokens that give users access to features and governance of the project. This event is often confused with an initial coin offering (ICO), although there are fundamental differences between them. In this material, we will understand what token generation is in practice, why projects organize it, and what signals potential investors should pay attention to.

TGE is a system for distributing utility tokens, not funds

During token generation (TGE is the process in which) a project creates digital assets on its own or an existing blockchain and issues them to qualified users. The main difference from other mechanisms is that these tokens serve for governance, access to functions, or participation in the ecosystem, rather than for accumulating value.

Created tokens are programmed via smart contracts to perform various tasks: voting on proposals, earning rewards through staking, transaction fees, or access to premium features. Most decentralized applications (DApps) are based on tokens issued in this way, which explains the high interest of the crypto community in generation events.

User engagement can begin even before the official release — through futures trading on the pre-market. This allows projects to gather a critical mass of participants before the main launch.

TGE is not an ICO: key differences in issuance mechanisms

Although both mechanisms are related to the issuance of digital assets, their purpose and risks are fundamentally different. ICOs are traditionally used to attract investments through the sale of assets, often positioned as securities. This attracts regulatory attention and creates legal risks for projects.

TGE is a way to avoid these risks by positioning tokens as utility assets for ecosystem management. Projects choose this scheme to demonstrate token functionality instead of its investment appeal. In some cases, generation may include crowdfunding, but this is a secondary goal.

Why crypto projects organize token generation

Stimulating active participation

Issuing tokens motivates users to engage with the project. Holders gain voting rights proportional to their token volume — the more assets, the greater influence on decisions. Some projects offer staking to multiply assets: participants lock tokens and receive rewards from the project treasury. This creates long-term engagement instead of one-time interaction.

Expanding the community and fostering innovation

TGE is a powerful tool for attracting new developers and enthusiasts. A strong community is the foundation of a project’s success. New participants contribute ideas, create tools, and expand the ecosystem, supporting token value growth and platform popularity.

Strengthening liquidity

When listed on cryptocurrency exchanges, issued tokens become more accessible for trading. High liquidity stabilizes the price and facilitates participants’ exit from positions without sharp jumps. This creates a healthy market where supply and demand are balanced.

Attracting funding

Although the main goal of TGE is governance distribution, it is often accompanied by fundraising. Thanks to blockchain technology, projects can quickly and securely raise capital without traditional financial intermediaries, reducing costs and speeding up the process.

How to assess the quality of upcoming token generation

Before participating in any TGE, conduct your own research (DYOR). Here are key parameters to check:

Study the project documentation

Start with the whitepaper — this document contains comprehensive information about the mission, goals, technology, roadmap, team, and economics of the project. It helps understand what contribution the project makes to Web3 and how realistic its plans are.

Check the experience and reputation of founders

A team with a successful track record in crypto and traditional finance usually handles launches better. Study what projects the founders have previously created, whether they attracted well-known investors or advisors. This provides insight into the team’s competence and networks.

Analyze the community on social media

Check the project’s X (Twitter) and Telegram communities — you can find honest opinions from users and developers there. Active discussion, quality questions, and open responses from the team indicate a healthy ecosystem. Passivity or hostility are red flags.

Evaluate risks and competitors

Study the regulatory environment around the project and the crypto space in general. What compliance requirements are expected in the coming years? Who are the competitors in this segment? How differentiated is the new project? These questions help understand the potential for long-term growth.

The main risk of TGE is rug pulls, where founders inflate the token price and abruptly close positions, leaving other participants with losses. Careful research of the team and verifying their reliability reduces this risk.

Practical examples of successful token generations

Uniswap — decentralized exchange with community governance

Decentralized exchange Uniswap launched in 2018 and operated for a long time without its own token. In September 2020, the project issued the governance token UNI, creating one billion units. The plan was to distribute all tokens over four years until September 2024.

UNI holders gained voting rights for project decisions. Simultaneously, a liquidity mining program was launched: providers of assets in four main pools received UNI rewards for locking funds. As of February 2026, UNI trades at around $3.35. This launch became a model of a successful transition from a centralized product to a decentralized organization.

Blast — Ethereum Layer 2 with an ecosystem of applications

Blast, an Ethereum Layer 2 solution, preceded its official generation by four months of preparation. In June 2024, the BLAST token was distributed to users via airdrop. Recipients included anyone transferring Ether or USDB stablecoin into the Blast network, as well as active participants in the ecosystem’s decentralized applications.

At the time of generation, participants received 17% of the total BLAST supply, stimulating millions of users to activate addresses in the network. This demonstrates the effectiveness of airdrops for rapid user base expansion.

Ethena — synthetic dollar with rewards for participants

The Ethena project revolutionized DeFi with its synthetic dollar USDe. On April 2, 2024, the project conducted a governance token generation for ENA, releasing 750 million units to holders of special certificates (shards). These certificates were earned through activity within the Ethena ecosystem.

As of February 2026, ENA trades at around $0.11. This approach shows how projects can reward long-term participants who helped develop the ecosystem long before the official token management release.

Summary: why token generation remains a key event in crypto

Token generation (TGE) is not just a technical process; it’s a political moment in a crypto project’s life. At this point, the project transitions from centralized control to decentralized governance, demonstrating readiness to share power with the community.

TGE is a mechanism that simultaneously rewards early participants, incentivizes new users to join, strengthens token liquidity, and sometimes attracts capital for development. The crypto community closely monitors upcoming generations, seeing them as an opportunity not only to earn but also to become part of a growing ecosystem.

If you are interested in a specific project and believe in its long-term potential, follow its TGE roadmap. This can become a key entry point with minimal barriers. Remember: the generation is just the beginning, not the end. The real value lies in how the project leverages the new community for innovation and growth.

Frequently Asked Questions

Why is TGE better than ICO?

TGE is not necessarily better, just different. TGE focuses on distributing utility tokens for governance, while ICOs traditionally raise investments. TGE has a more favorable regulatory environment, so many projects prefer this mechanism to avoid their tokens being classified as securities.

What are the main risks of TGE?

The main risk is rug pull, where founders manipulate the price and disappear with the profits. The second risk involves market manipulation and fake projects. The third involves regulatory changes that could reclassify utility tokens as securities. Always conduct thorough due diligence before participating.

Does TGE guarantee income?

No. There are no guarantees in crypto, especially regarding profits. TGE is conducted to issue utility tokens and engage the community, not to create investment instruments. All token parameters depend on market acceptance.

Do all crypto projects participate in TGE?

No. Some projects operate without their own tokens or use existing assets (e.g., stablecoins). However, most DeFi projects and decentralized applications rely on TGE to launch governance and incentivize the community.