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Knowing the risks associated with a system, their probability and their severity is the first step towards good risk management. There is little details and analysis that has been published about the risks associated with Ethereum so far.

From the Wikipedia risk management article:

Risks can come from various sources: e.g., uncertainty in financial markets, threats from project failures (at any phase in design, development, production, or sustainment life-cycles), legal liabilities, credit risk, accidents, natural causes and disasters as well as deliberate attack from an adversary, or events of uncertain or unpredictable root-cause. [...]

Risk sources are more often identified and located not only in infrastructural or technological assets and tangible variables, but also in human factor variables, mental states and decision making. The interaction between human factors and tangible aspects of risk highlights the need to focus closely on human factors as one of the main drivers for risk management, a "change driver" that comes first of all from the need to know how humans perform in challenging environments and in face of risks [...].

In December 2014, Mariam Kiran from the University of Bradford and Mike Stannett from the University of Sheffield published a document called Bitcoin Risk Analysis which include an in depth analysis of the various different risks associated with Bitcoin. Is there any similar document for Ethereum?

Ethereum is most likely going to share a good amount of the same risks that Bitcoin does. What are the additional risks that Ethereum has and that Bitcoin does not have? Is there any risk that Bitcoin has and that Ethereum does not have?

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The following was originally posted on reddit.


Technical risks

  • CASPER POS is challenging and not 100% certain it will work.
  • Scaling & sharding is challenging and not 100% certain it will work.
  • Maybe despite being batshit crazy Paul Sztorc could be right that oracles are impossible.
  • Possible long term security holes of fundamental flaws might be discovered.

Resource & cashflow risk

  • Foundation has limited funds.
  • Key developers could be poached.
  • Still not seeing evidence of significant VC investment.

Competition risks

  • R3 may win financial market.
  • Hyperledger may win IOT market.
  • Ripple could win international settlement & remittances market.
  • Some anon coin may win the darknet market.
  • Could have a million ethereum alt coins indeed ConsenSys could themselves fork Ethereum.
  • Bitcoin might finally sort out their politics.
  • Rootstock & counter party.
  • Some new unknown coin could be a better ethereum than ethereum.

Regulatory risks

  • Governments could clamp down on crypto exchanges.
  • Governments could require permissioned system or back a rival system.
  • Governments could clamp down on IPO or crowd shares.
  • Governments could clamp down on issuance of assets or create more onerous KYC requirements.

Reputational risk

  • If Kraken or Polonex is the new Mt Gox.
  • If some scam or pyramid scheme gives Dapps a bad name.
  • If a significant number of wallets are hacked.
  • If Ethereum community becomes as toxic as the bitcoin community.

Barriers to adoption

  • It is hard to communicate what Ethereum is.
  • Press insist on using the term 'blockchain' or 'bitcoin'.
  • Ethereum PR sucks.
  • It is still hard for 'normal people' to buy Ether and securely store it.
  • There is not yet a killer app.
  • Maybe nobody actually wants Dapps or even crypto currency they just want an investment opportunity.
  • Even if there is a killer app the advantages of decentralisation are unclear.
  • Maybe none actually cares about decentralisation apart from nut job bitcoiners and they only care about bitcoin.
  • Still no major exchanges listing and hard to buy in directly from fiat
  • Major Chinese exchanges may never add Eth because they make all their money from mining BTC so don't want Eth to succeed.

Risk Ethereum could succeed without Ether becoming really valuable

  • Stable coins, gold & other currencies will be used for payment & wealth storage not Eth.
  • Eth will lose it's monopoly for buying gas.
  • Because of competition & scaling transaction fees will fall to the cost of operation & capital.
  • what do you mean by "Ethereum PR sucks. " ? – Nicolas Massart May 6 '16 at 11:04
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    "It is still hard for 'normal people' to buy Ether and securely store it" -- FYI this has been largely mitigated in many major markets by coinbase.com – PatKilg Jan 11 '17 at 19:00

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