Token Generation Events (TGES) are increasingly criticized as an exit lamp for crypto founders, leaving behind a blockchain that leaves little actual activity behind.
In many cases, projects debut with thin circular supply and inflated ratings, with few opportunities to see sustainable returns on authentic supporters. Industry sources have argued that it will help low emergence and automatic market makers (AMMs) temporarily maintain prices, but once unlocking begins, sales pressure will overwhelm the regular market.
Some tokens spike when launched with hype and rarity, but most slide steadily as supply enters the circulation.
“It’s a never-ending cycle,” Brian Huang, co-founder of Crypto Management Platform Glider, told Cointelegraph. “The new chains become irrelevant, the leaves of talent have left, and the people left are stuck in the chains floating by market makers and AMMs.”
After an increase in the number of orphan chains
Over the past year, several founders have faced backlash with the project leaving the project soon after the tokens are released.
Story Protocol founder Jason Zhao left his full-time role about six months after the token was released. Early reports suggested that his exit coincided with the six-month vesting cliff, but story denied this, pointing out that core contributors are subject to one-year cliff within a four-year vesting schedule.
Related: Crypto market prepares for Fed rate reduction amid the shaking of governors
“In reality, the launch of the token should be the start of the project,” Huang said, questioning the intent behind such an early departure.
Aptos founder Mo Shaikh resigned on December 19, more than two years after the launch of the Aptos token and mainnet. His exit wasn’t as immediate as Zhao, but critics pointed out that it came shortly after a massive vesting milestone.
Blockchain Capital investor Sterling Campbell has confirmed that some founders will treat token launches as cash grabs, but argued that the issue is wider.
“There’s also the fatigue of founders, incentive inconsistencies, and in some cases the brutal perception that there’s no fit in the product market,” Campbell told Cointelegraph.
“Dynamics doesn’t really feel about individual maliciousness, and it also feels like a system where people are prone to leaving early.”
Messari researchers reported that token vesting has problems with token performance. An analysis of 150 major tokens found that tokens with high insider allocations worsened in 2024.
Does the Post-tge exit indicate that there are too many blockchains?
The flood of token generation events raised broader questions about whether the industry needs more blockchain. What once was the Launchpad, an ambitious new network, has been criticized in itself as the ultimate goal, but blockchain is supposed to fade into the background.
In a recent interview with Cointelegraph, Altius Labs co-founder Annabelle Huang (who has no connection with Brian Huang), said the industry doesn’t need generic blockchains like Ethereum and Solana. However, she added that there is room for a new network built for specific use cases.
Related: Institutional adoption faces blockchain bottlenecks: Annabelle Han
Some projects highlight this shift. For example, high liquids gained traction by constructing differential exchanges and perpendicular to their own chains, rather than promiseing a new general purpose chain. In contrast, many new Layer 1 and Layer 2 launch without a breakout app to justify its existence in TGE.
“We’re seeing a lot of investment flows in high lipid apps and other projects that already have actual usage. In contrast, many of the new L1 and L2 are in the waiting stage,” says Brian Huang of Glider.
It is not very clear why the new chain continues to draw venture capital. Solana once justified launches with a speed advantage over Ethereum, but most new blockchains now work at a similar level. As a result, investors may be drawn to networks with established distributions. At the same time, competition is growing as business-driven chains from companies like Stripe and Robinhood enter markets with already large user bases.
“They accelerate their distribution and normalize encryption for mainstream users. [but] They risk diluting the mentality of the network that is not permitted,” Campbell said.
“There is a very real risk of leveraging the open source network that Robinhood has built over the past decade and eating everyone’s lunch.”
TGE and vesting schedules focus on long-term supporters
Even if the token is targeted for a best schedule designed to stagger insider sales, optics are particularly challenging when the founder finishes a multi-million-dollar project right after TGE.
Please note that some communities have public vesting conditions and investors must know the risks before making a purchase.
The vesting term brings a difficult battle for the authentic supporters of many modern chains. The May 2024 Binance Research Report estimated that $155 billion worth of tokens were expected to be unlocked by 2030. Without sufficient demand to absorb them, a stable release of supply risk adds sustained sales pressure to the market.
That tension refers to a deeper problem for tges itself. Designed as a fundraising mechanism, they are increasingly functioning as liquidity events that reward insiders while leaving the ecosystem without the establishment steward.
Unless the project can demonstrate durable use beyond launch, patterns of inflated assessments, early exits and fading blockchains may continue.
magazine: 7 Reasons Why Bitcoin Mining is a Worst Business Ideas