🤕Risks related to the Blockchain and DeFi

Cryptocurrencies are volatile

Volatility is one of the numerous risks associated with cryptos. It leads to emotional rollercoasters and can be dangerous, especially in the short term. It’s not rare that prices fluctuate 20% within a day.Savers shouldn’t invest more than they can afford to lose. Cryptocurrencies are not appropriate for everyone and investments should always consider the personal situation and goals of an individual.Stablecoins aim to provide a solution to the high volatility of cryptocurrencies. They are pegged to national currencies such as the US Dollar, the Euro, or the Swiss Franc. DeFi saving can take advantage of stablecoins by earning interests with stable capital. However, there exist many different stablecoins and they expose investors to counterparty risks (read: depeg risks). The choice of which one to use is of utmost importance and might require advice from a professional.

Cryptocurrencies are not regulated

There are no customer protections such as other traditional investments may have (e.g. deposit protection). The unregulated nature of the space led to many thefts, hacks, and scams that go unpunished. A common scam is the “pump-and-dump” scheme, where founders of a protocol attempt to boost the price of a token on false and misleading statements and then sell their position once the hype led the price higher.​

Smart Contracts can have bugs and/or can be hacked

Think of Smart Contracts as the apps you use with your cryptos wallet. These apps are made of lines of code, which can potentially be poorly designed, either by negligence or by dishonesty. Hackers can take advantage of a breach and steal users' assets. Other scenarios are bugs in the code that leads to the impossibility of withdrawing funds.