What are the risks with Ethereum?
While Ethereum is a very exciting technology and new form of money, it doesn’t mean that there is no risk associated with it. As a starting point, it’s important to remember that the same intuitive rules that apply to traditional money also applies to Ethereum. For example, don’t store cash under your mattress else it might get stolen, or don’t trust your money with strangers.
Ethereum also has some fairly unique risks: for one, it’s a brand new technology, and while it appears very secure and robust, there is always a chance that it might fail. That is also a reason why you should never put ‘all your eggs in one basket’ and never buy more Ethereum than you can afford to lose. Ethereum is also more volatile (i.e. it can move a lot in value both up or down in a short space of time) than many other currencies, and while this appears to be stabilising over time, it’s sure to experience many highly volatile moments in the future.
Also remember that Ethereum transactions are like cash in that they are irreversible – so if you send Ethereum to the wrong person, or your Ethereum wallet is compromised and someone steals your Ethereum, it might be very difficult if not impossible to get it back. Ethereum is also not backed by any entity, so if you lose your Ethereum, your service provider or ‘the Ethereum network’ will not be able to reimburse your funds. That’s why you need to ensure you use highly trusted product or service providers to help you, similar to how you would ask a bank to help you safely store your money.
Lastly, Ethereum’s value is determined by the amount of people or business that are willing to accept it, and this is by no means guaranteed. If it grows it will be very good for Ethereum, but if less people want to use Ethereum, it will have a very negative impact on the price and might lead to Ethereum not being used at all.
To summarise, Ethereum is very exciting and has tremendous potential to change the world, but make sure you understand the risks that go hand in hand with that.