More and more people criticize Token Generation Events (TGE) as a "cash-out channel" for cryptocurrency founders, leaving blockchains with almost no actual activity.
Many projects often launch with extremely low circulation and inflated valuations, making it difficult for true supporters to achieve sustainable returns. Industry insiders believe that low circulation and Automated Market Makers (AMM) help maintain prices in the short term, but once the vesting period unlocks, the selling pressure often quickly overwhelms the market.
Some tokens surge due to the hype and scarcity at launch. However, as supply gradually enters circulation, most token prices continue to decline.
In an interview with Cointelegraph, Brian Huang, co-founder of the crypto management platform Glider, stated, "This is an endless cycle where new chains become irrelevant, talent drains away, and those who remain can only rely on market makers and Automated Market Makers (AMM) to keep the chain operational."
In the past year, several founders have left their projects shortly after the token launch, drawing widespread attention in the industry.
Jason Zhao, founder of Story Protocol, stepped down from his full-time position about six months after the token launch. Early reports suggested that his departure coincided with the vesting cliff, but Story denied this claim, pointing out that core contributors adopted a one-year vesting cliff and a four-year vesting schedule.
According to Brian Huang, "In reality, the token issuance should be the beginning of the project." He also questioned the motives behind such early departures.
Mo Shaikh, founder of Aptos, also resigned on December 19, more than two years after the launch of the Aptos token and mainnet. Although his departure was not as swift as Jason Zhao's, critics pointed out that it also occurred after a significant vesting milestone.
Sterling Campbell, an investor at Blockchain Capital, noted that some founders view token issuance as a cash-out, but he believes the issue is broader.
In an interview with Cointelegraph, Blockchain Capital investor Sterling Campbell stated, "Founder burnout, misaligned incentives, and sometimes the harsh realization that the product does not fit the market."
Messari researchers reported that token vesting is crucial for token performance. An analysis of 150 mainstream tokens found that tokens with a higher proportion of insider allocations performed worse in 2024.
The large number of token generation events has raised questions about whether the industry truly needs more blockchains. Once seen as ambitious new networks' "launchpads," they are now criticized as the ultimate goal of projects, with the role of the blockchain itself gradually marginalized.
In a recent interview with Cointelegraph, Annabelle Huang, co-founder of Altius Labs (unrelated to Brian Huang), stated that the industry does not need more general-purpose blockchains like Ethereum or Solana. However, she added that there is still room for new networks targeting specific use cases.
Some projects embody this shift. For example, Hyperliquid does not promise to build a new general-purpose chain but has gained attention by building a derivatives exchange and vertically integrating into its own chain. In contrast, many new layer one and layer two projects did not demonstrate killer applications that could prove their value at the TGE.
According to Brian Huang of Glider, "We see a lot of funds flowing into Hyperliquid applications and other projects with existing real use cases. In contrast, many new layer one and layer two projects are still in a wait-and-see phase."
It remains unclear why new chains still attract venture capital. Solana once marketed itself with speed advantages over Ethereum, but now most new chains have similar performance. Therefore, investors may prefer networks with established distribution channels. Meanwhile, companies like Stripe and Robinhood are also entering the chain space with their large user bases, intensifying industry competition.
According to Campbell, "They have accelerated the distribution speed, getting mainstream users accustomed to cryptocurrency, but there is also a risk of diluting the spirit of permissionless networks."
When founders exit multimillion-dollar projects shortly after the TGE, even if the tokens have vesting terms to mitigate insider sell-offs, this phenomenon still raises concerns.
Some community members point out that vesting terms are public information, and investors should be aware of the associated risks before buying in.
Vesting terms also put significant pressure on the true supporters of many modern blockchain projects. In May 2024, Binance Research reported that tokens worth $155 billion are expected to be unlocked by 2030. If demand is insufficient to absorb this supply, the steadily released supply may continue to increase market selling pressure.
This tension reflects deep-seated issues within the TGE mechanism itself. Designed as a financing mechanism, TGE increasingly resembles a liquidity event that rewards insiders, while the ecosystem loses the guardianship of its founders.
Unless projects can prove lasting real use after launch, phenomena such as inflated valuations, early exits, and blockchain shrinkage may continue to occur in the industry.
Related: JPMorgan CEO: The Federal Reserve will not cut rates before inflation declines, stablecoins pose no threat to banks
Original article: “Are Token Generation Events (TGE) Becoming the End of Blockchains?”
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