Disadvantages and Risks of Ethereum
Even though the advantages and potential of Ethereum are compelling, there are a number of negative aspects and risks associated with it as well. In this chapter, we'll discuss some of the dangers and risks associated with Ethereum.
The cryptocurrency Ether is not intended for use in real-world transactions.
Ether, the cryptocurrency that is used to make payments on the Ethereum network, is also used to pay for computing power that is required to run decentralised applications (dApps) and smart contracts. Ether is not intended to be used as a payment method in physical stores, on the internet, or as a substitute for other real-world payment methods. Cryptocurrencies such as Bitcoin and many others are more practical forms of payment, with many of them being accepted at shops and websites all over the world. The popularity of the Ethereum platform platform, as well as the number of people running decentralised applications (dApps) and smart contracts, will determine how many people use Ether.
It is possible that the value of ether will decrease.
Although the Ethereum platform is becoming increasingly popular, there is no guarantee that the price of Ether will rise in tandem. Many people who purchase Ether do so solely for the purpose of making speculative profits and do not intend to use it for the purposes of running dApps or smart contracts. Trades and speculators may have placed an excessive value on Ether's current price. This could result in a significant decrease in the price of Ether if they sell. It is possible that the price of Ether will not increase even if developers and businesses use the Ethereum platform if there is an increase in the supply of Ether created or if demand from traders decreases.
Technology that is new and untested
Ethereum is a relatively new technological development. Despite the fact that it has a lot of potential, there are still a lot of unknown risks associated with new technology. Even though many companies have joined an alliance to promote the use of Ethereum within their organisations, the technology is still in the research and feasibility stages.. The use of Ethereum as a replacement for existing systems has been limited to a small number of businesses. There have also been a few mainstream dApps that have gained popularity over the past few years. The majority of the dangers and risks associated with using Ethereum may still be unknown at this time, and they may not become apparent until Ethereum is used on a larger scale.
Smart Contracts Have a Number of Problems
Smart contracts have a number of advantages; however, there are also significant risks associated with the use of intelligent contracts. As previously stated, the DAO hack is the most prominent example of a smart contract flaw that needs to be addressed. A poorly written smart contract provided an opportunity for a group of people to take advantage of the contract and steal more than $50 million. Thousands of people examined the code in the DAO smart contract, and the vast majority of them found no problems. The smart contract's flaws were only discovered after they had been exploited, which delayed their discovery. When it comes to a standard legal contract, if the wording is poorly written and allows someone to take advantage of the contract, the contract can be taken to court. A legal dispute over the wording and intent of a contract can be resolved through the use of legal action or arbitration. Smart contracts, on the other hand, do not operate in this manner. Once a smart contract has been executed, it cannot be contested or reversed in any way. A smart contract cannot be challenged because there are no lawyers or courts to do so.
The Threats posed by a Massive Worldwide Supercomputer
If you've seen any of the Terminator films, you're probably aware that Skynet is a global computer network. When Skynet was activated, it recognised humanity as a threat and launched a campaign of annihilation against them. The Ethereum network and smart contracts have been compared to the fictional computer programme Skynet. Ethereum is a worldwide network of computers that are linked together and that run applications and code that cannot be argued with or manipulated in any way. A vulnerability in the code of a smart contract was exploited by hackers in the DAO hack, resulting in the theft of more than $50 million dollars. While there are financial risks associated with smart contracts, there are far greater security risks associated with them. Smart contracts are being developed for a wide range of applications, including the connection of household appliances, automobiles, phones, and other electronic devices. Most modern armies today rely heavily on computer systems, with some of the most advanced weapons heavily reliant on computer technology as well. To replace their existing database systems, governments are now examining the possibility of implementing blockchain-based technology. The possibility that the smart contract will not function as intended exists if there is a programming error or the code has been written incorrectly in the first place. The contract could then continue to operate without being stopped or altered, potentially resulting in catastrophic consequences, particularly if it is connected to government or military systems.
dApps are generating a lot of excitement.
There are numerous advantages to using dApps over existing applications. However, throughout history, there have been numerous technologies that offered advantages over existing alternatives but were unable to gain widespread acceptance. Applications such as Instagram and Facebook are completely free; however, they collect and use your personal information in order to allow advertisers to sell products and services to you directly. Your personal data is the product that these companies are selling to other people, and they provide you with no cost to use them. Users, rather than a centralised company, are in control of decentralised applications. Users have complete control over their personal information and data. In exchange for this level of control, using the dApp will typically be more expensive. Photo sharing applications such as Instagram and Snapchat may charge users for a variety of actions such as uploading photos, liking photos, and other features. It may be difficult to persuade people to pay for a new application that is similar to a more popular free application that they are already using. It is possible that people will not choose dApps over existing applications because of concerns about their privacy and the benefits of decentralisation, particularly if they will be required to pay a fee to do so.
Notes on the Disadvantages and Risks of the Ethereum Platform at the End of the Chapter These are just a few of the dangers and risks associated with the Ethereum platform. Ethereum is still in its infancy, and many potential dangers and risks may be unknown at this time. dApps and smart contracts still have a long way to go before they are accepted by the general public. It is still possible that they will never gain widespread acceptance in the mainstream. The future of Ethereum is still up in the air, and in the following chapter, we'll take a look at some of the factors that could play a role in determining its fate.