How will the Cardano Project prevent all the scams and low quality tokens that Ethereum has caused?

I see on many posts and forums throughout the crypto world that 90% of ERC20 tokens will fail and a lot of ICOs are scams. Ethereum has made these “creation of money” scams more possible and easier than ever before. And harder to detect, the good ones are lost in the weeds.

Software engineers now have the power to create money out of thin air. It only takes a few smart people to get a block chain going. They may have bad or unknown intentions.

This brings up some questions that need looked at:

  1. Is there a way to prevent scams on the Cardano network?
  2. Should any random token created by some group of random devs be allowed to operate on the Cardano network?
  3. Is there a way to measure the quality of a token?
  4. Can smart contracts prevent scam tokens?
  5. Should Cardano establish a metric to determine if a coin shold operate on the network?

I think it is unreasonable to expect every single average human consumer to DYOR (do your own research) and be a crypto expert before they make typical everyday decisions on how to make a purchase or a typical investment if cypto is rife with scams. They will just avoid crypto and stick with a known, trusted, simple, working fiat. “Why would I do tons of research when I can just whip out my Visa card?” or “Why risk my life savings on a private key on a computer when I can just buy my employers 401k?”

Crypto needs to become more reliable, trust worthy, and scam resistant, and I am talking about scams that involve the creation and distribution of money, not the kind of scams that have been going on since the beginning of time. Trust needs to be established. (I want to avoid the EOS method of course).

Your thoughts?

Warm regards,


These are excellent questions… while I agree about the spirit of your concerns, I don’t think censorship on a platform level is possible.

For starters it is hard to evaluate the nature of ICOs as scams because doing so requires the proof of intent. These instruments are risky and should be treated as such—with caution.

For example:

If an honest ICO fails and you lose money, is it a scam?

If a scammy ICO succeeds and you triple your money, was it a good investment?

These things are hard to evaluate on the platform level. We might have some guidelines on what to disclose so the public or research houses can assess the merit of investments.

I agree, that we need quality research reports in this space. It’s a new tech which makes it hard but there are people involved in crypto research as we speak.

Maybe soon you all can subscribe to a service that properly assessed these assets.


Absolutely, I agree on the points highlighted.

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I’m confident that the ecosystem will evolve so that community consensus will be both highly reliable and highly accessible and the sort of DYOR you envisage will not be necessary – far from it, in fact.

In general terms, I think, “the community” is the answer to most or all such concerns. That’s the decentralised alternative.


Personally, I don’t think it is a good idea to create an entity that can determine what can and what cannot go onto the blockchain. That’ll just create another centralised system, and that isn’t what this is about.

We can’t expect every single person to do their own research, maybe, but we’re also not expecting everybody who owns a dollar to be investing into NYSE. For people who do not wish to do their own research, they can either gamble their money, trust the opinion of others (perhaps paid), or not invest. Owning Cardano is equivalent to investing in scammy projects, the same way that owning a dollar is equivalent to buying cocaine. Just because people do stupid things with their money, doesn’t mean others have anything to do with that.

Cryptocurrencies in large are about giving people back agency over their money, and how they wish to spend it, without a governong body telling them what they can and can’t do. And if people are dead set on getting scammed that that is as much on them as buying magic beans on the street corner. Sorry for al the metaphors :smile:.

Finally, there is still Emurgo which helps build ventures on the Cardano ecosystem. Projects that successfully complete the program are awarded the “Emurgo seal of approval”. This should be a clear indicator for low-risk projects that one might invest in.

TLDR: Using Cardano should be considered like using dollars. You can play as risky as you want with it. If you just want to buy your groceries with it, no risk. If you want to invest into projects you do not understand, the risk is on you.


I agree the eco system will evolve. But what Ethereum has done is the equivalent of creating a very powerful weapon and handed it over to a bunch of kids and saying “here you go kiddos, don’t hurt yourselves” and “whichever kids are still alive after this is all over gets to wield the weapon”. Now that analogy is just to go to an extreme to show the nature of the problem.

I think Cardano can do much better than that if people try to address this problem Ethereum created. People are putting a lot of brain power into how the token works, how the technology works, the ecosystem of electronics. Maybe some of that brain power needs to be directed at quality standards?

I will give you another example. When I go to a market, I know what good tomatoes look like and I know what rotten tomatoes look like. I know what good clothes look like and what bad clothes look like (my wife would disagree). I know what a good bills look like and bad bills look like, so I can exchange these items with a merchant and we both know we got a good product. Currently that quite difficult with cryptos.

Maybe there are some metrics that can be collected during the ICO, and some bench marks established, or milestones that can be measured or used as a standard of quality that prevent low quality crypto and scams into a market?

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I agree @Royal I don’t think “create an entity” is a good idea either. I think establishing enforceable metrics or some standard of quality is a good idea, but I don’t know exactly what that looks like. I am curious to know if metrics and standards can be defined or is there some other way to screen out the flak.

Edit: Here is another example… although maybe not a good one… Apple does not allow just any garbage software on the App store. They have some kind of standard (I would hope) to ensure that software meets some kind of benchmark and requirements before making it EASILY available to their customers. Of course their customers can download from any where on the internet, but at least they have some where to get a piece of software of some level of quality.

I agree with the Apple example. Partly at least, the last time I was in the App industry you could change the entire code of an App as soon as it was approved :wink:. But more to your point: In this case Apple is considered a trusted (and controlling) entity for their ecosystem. The controlling part is specifically something we wish to reduce or eliminate within cryptocurrencies.

That doesn’t mean we can’t have trusted entities, of course. Information asymmetry is a core driver of business. Even with so much information freely available on the internet, none of us can learn it all until we figure out how to upload info straight to our brains. That’s why it is worthwhile to spend time and resource to learn a profession. Because of information asymmetry, we pay others for their expertise on medicine, law, investments, plumbing, construction etc.

Therefore, as information asymmetry will exist between people who research investments, and people who don’t, there should be a solid business-case for establishing trusted entities, which will check the codes, track these metrics and repackage them into summaries or advice (in exchange for a fee). Similar businesses already exist. I am not convinced that one of the Cardano enterprises should be doing this, as that might give the impression that CE is using its status as trusted entity to still control what is successful on the blockchain, and what isn’t. But I think there is a definite business opportunity for third-party entities to enter this field.

On the enforceability of the metrics; I am not convinced that is a great idea. Shelley got pushed back because of some difficulties or so, right? Yet we don’t consider this a “scam” from IOHK’s side, rather we see it as them making effort to release solid products. So how, like Rob pointed out, there is a big grey area of what is “good” and what is “bad”.

To tie back into the App example. I believe that currently Valve (Steam) has given up all attempts to regulate their marketplace, and its a mess. Similar to Apple, Valve should regulate its market because they benefit from selling the products and marketing them, gaining a benefit and abusing their agency position as a market provider. Apple and Valve receive a part of the games’ sales (in-App or upfront) as a fee for regulating and maintaining a healthy marketplace. But they don’t control the Apps they don’t “regulate”. Similarly, I don’t think Cardano should be expected regulate tokens it isn’t itself marketing. The tokens it does market, would be the Emurgo backed ventures, as I see it.

Sorry if that’s a bit unclear, this is me thinking and writing at the same time :joy:


People have been trying to quantify quality for a long, long time, and have gotten nowhere. I’m glad all these efforts are going into tractable problems.

Edit: another way of putting it – there’s a reason why “qualitative” and “quantitative” are antonyms (opposites). (Sorry, I might get a bit obsessive on this, it connects with what I spent much time studying in philosophy.)


I just ran across this and thought it was relevant here:

The point of cryptocurrencies is to let people make poor choices and to force them to accept the consequences of their actions.


Rob, this statement is just not true. Every industry I know has standards of quality (except crypto?) and every person has certain definitions of quality that can be agreed upon, and some standards of quality are personal preference, some are almost universal.

For example the Weiss report tries to define (subjectively) which cryptos are quality and which are not. Maybe the Weiss report is a good starting point for this discussion. And maybe the Weiss report needs more visibility.

We know Cardano has done well with the Weiss report, but can it be used as a measure?


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And this may be why the average Joe wants nothing to do with crypto. The wild wild west mentality. No standards free for all. Everything Charles says is not gospel.

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I didn’t say quality standards can’t be agreed upon, and they’re obviously useful. I said they can’t be quantified, by which I meant objectively and numerically.

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That’s true, but for him and many others, this is one of the most important principles. You should at least understand where the pushback is coming from, even if you have no sympathy with it.


Letting people walk through a minefield to find out where the mines are is not a principle. It is just a bad way to find out where the mines are located, especially if you are one of the people who steps on the mine.

I am all for free markets and openly trade-able currencies, and at the same time I can still expect some level of QA by the system that is providing that free market.

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I actually like the idea. Quality metrics would be a good way to ensure some kind of transparency at least and verifiable? data points to quickly check the viability of a project. It may not eliminate scams but sure will make them more expensive for average dudes/dudettes to set up their scammy operation. We have to be careful though not to make it easy for players to “game” this system.

The whole ecosystem would benefit if we could at least reliably identify the team behind ICOs, and I mean it beyond fake linkedin profiles here. Maybe even develop a digital identity solution. I feel people are less likely to defraud you if you know who they are and what jurisdiction they reside in.


If that was the thinking I’d agree with you but it’s not, it goes way deeper. But as a newcomer to this area I’m not the best person to explain it, so I’ll bow out, and someone else can take over, or not, as the case may be…


Sorry to see you bow out.

Maybe the better questions I should ask are:

  1. How do you define a scam?
  2. How would you define a $H!T coin?

Then the definition of quality would be the opposite of that maybe…

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Rick, what parameters were you evaluating when you decided to invest in the TMT ICO recently?


Oh great question Risus!

  1. TMT (LiqEase) has a target market with a potential of (internet verifiable) $43 Trillion.
  2. TMT has a clearly defined purpose to fill that market.
  3. Clearly defined price (although that changed drastically).
  4. People who could be identified by reasonable sources.
  5. People had relevant experience in the field (not just software devs).
  6. Backed by Cardano ( by proxy Emurgo, I didn’t know Emurgo at the time). I had to say “well if Cardano trusts them then maybe I can trust them”.
  7. Speculation with the possibility of 100x profit if they win some day.
  8. Greed - 40% discount when buying early.

The market was very hard to understand with TMT though and the purpose of the token. It took a lot of reading and forum questions. To be honest I had trouble figuring out all the players and parts for 2 months before I bought into the ICO. I almost missed the 40% discount and FOMO’d in on the last couple days of the biggest discount.