What are the risks of your investment?

Risks related to loans:

The platform is still in an early stage of development, so it still faces many market fit risks, both at a technical and legal level, as well as the correct selection of borrowers, as well as obtaining enough lenders to scale the activity to a level in which it is self-sustaining.

As these are loans linked to agriculture, there are intrinsic risks in this sector, both in terms of pests, environmental events, and price fluctuations that can trigger the level of defaults at a given time.

Financing is largely used to facilitate the coffee trading activity, at least in this early stage of the platform. This activity involves its own risks, especially related to the evolution of coffee prices and the collection of sales made on credit.

To minimize these and any other risks we developed our own collective collateral system operated by the Ethix token, which in turn has its own risks as we will see below. To protect against default risk, both the credit originator and the auditor deposit 40% of the total value of the funded loans to a community in the form of ETHIX. Additionally, a percentage of the lending platform's profits is used to purchase ETHIX and deposit it in a special fund, which serves as the first source of repayment in the event of default.

Despite protective measures such as the compensation fund and the collateral system, there is a risk of default as the compensation system is not able to cover all defaults or other eventualities, which could affect the recovery of the loans.

Since the loans are denominated in stable currencies linked to the Dollar, if it rises or falls with respect to the lender's reference currency, the expected profitability will be affected.

Risks Associated with the ETHIX Token and the collateralization/staking system:

The main risk is that since the Ethix are being deposited as collateral, if there are defaults or any eventuality that affects the lenders, they will be liquidated to cover the loans.

Since ETHIX operates on decentralized networks such as Ethereum and CELO, they are exposed to market fluctuations and technical issues that may affect their stability and value.

Although EthicHub implements measures such as collateralization with ETHIX to protect investment in the lending platform, the liquidity of the token in the market can vary significantly. The ability to liquidate collateral in the event of default depends on market demand for the ETHIX token.

Risks associated with stablecoins used in the Gnosis, Ethereum and Celo network (Ethereum L2):

Although "stablecoins" seek to reduce volatility by being tied to the value of fiat currencies, the dynamics of the cryptocurrency market can be highly volatile.

The lack of specific regulation in the cryptocurrency market may increase the risk of capital loss in the event that the value of the stablecoin suffers an unexpected depreciation.

Funds deposited in banks to support some stablecoins may be subject to bankruptcy, which would lead to their loss of value.

Technological vulnerabilities or network protocol failures may affect the functionality of stablecoins and tokens, potentially resulting in the loss of funds.

It is crucial for retail investors to understand these risks and consider them carefully before making cryptocurrency investments through platforms like EthicHub. The unregulated nature of cryptocurrencies adds a layer of uncertainty that must be carefully evaluated.

These are the main risks, but within them there are many more nuances and there are many more risks, these are just some of them:

• Risk of software deficiencies: EthicHub's smart contract system and platform are based on the Ethereum protocol, any malfunction, interruption or abandonment of the Ethereum Protocol may have an adverse effect on the service, smart contract system or the EthicHub platform. Furthermore, advances in cryptography, or technical advances such as the development of quantum computing could present risks to the service, the smart contract system or the EthicHub platform, rendering ineffective the cryptographic consensus mechanism that underpins the Ethereum protocol, Gnosis. , Celo or the Blockchain in which we operate at that time. The concept of a smart contract system, the underlying application and software platform is still in an early stage of development. There is no guarantee that the provision of the collaborative lending service will be uninterrupted or error-free because there is an inherent risk that the software may contain defects, weaknesses, vulnerabilities, viruses or errors causing, among other things, the complete loss of contributions. made for the provision of the service.
• Regulatory risk: Blockchain technology allows new forms of interaction and it is possible that certain jurisdictions apply existing regulations or introduce new regulations on applications based on Blockchain technology, which may be contrary to the current configuration of the smart contract system and, among others, things, may lead to substantial modifications to the Smart Contracts system and/or the EthicHub Platform, including its termination and the loss of cryptocurrencies contributed by users. Furthermore, the regulation of the activities proposed by the EthicHub platform is currently uncertain. It is not known what regulatory framework platforms such as EthicHub and the activities associated therewith will be subject to, the nature and obligations that will be imposed on EthicHub in order to comply with said regulatory framework or when/if EthicHub may even request be regulated, or be successful in obtaining the necessary licenses so that it can carry out the proposed activities in accordance with the law. The regulatory status of virtual currencies and DLT (Decentralized Ledger Technology) is interpretable and dynamic in many jurisdictions, making it impossible to accurately predict how regulatory authorities may apply current regulations regarding this technology and its applications, including the EthicHub platform. Likewise, it is impossible to predict whether the authorities will implement legislative and regulatory changes that affect DLT technology and its applications, and the meaning of said changes, including the EthicHub platform and/or the BlockChain on which we operate at that time. Regulatory measures could have a negative impact on the EthicHub Platform, including, for illustrative purposes only, the determination that the virtual currency used for the provision of the service is a regulated financial instrument that requires registration or licensing. EthicHub may cease to operate in a jurisdiction in the event that regulatory actions, or changes to law or regulation, make it illegal to operate in such jurisdiction, or commercially undesirable to obtain regulatory approval(s). necessary(s) to operate in said jurisdiction.
• Risk of losing access to tokens due to lost keys, escrow error, or other user errors: The virtual currency used to provide the service can only be accessed using an Ethereum wallet with a combination of account information of the taxpayer (address), private key and password. The private key is encrypted with a password. You acknowledge, understand and accept that if your private key or password is lost or stolen, the economic amount of the total virtual currencies contributed plus the interest that will be returned to you by the smart contract once the service is completed, are associated with your wallet. of Ethereum and therefore may be irrecoverable and permanently lost. In addition, any third party that obtains EU, even once the virtual currency has been contributed, can create the collaborative loan and obtain the established benefits and interests. access to your private key, including by obtaining access to the login credentials related to your Ethereum wallet. , may misappropriate your virtual currencies. Any errors or malfunctions caused by or related to the wallet or digital wallet that you choose to receive and store virtual currencies, including your own failure to properly maintain or use said wallet or digital wallet, may also result in the loss of your virtual currencies.
• Risk of theft: The Smart Contract System concept, the underlying software application and the software platform (i.e. the Ethereum blockchain) may be exposed to attacks by hackers or other persons, including, but not limited to, malware attacks, denial of service attacks, consensus-based attacks, Sybil attacks, smurfing and spoofing. Any of these successful attacks could result in the theft or loss of crowdfunding contributions, adversely affecting the crowdfunding service developed by the EthicHub platform. Additionally, because the EthicHub Platform is based on open source software, there is a risk that a third party or member of the EthicHub team could introduce intentional or unintentional weaknesses in the core infrastructure of the EthicHub Platform, which could adversely affect the EthicHub platform and the virtual currencies contributed.
• Risk of attacks on the consensus protocol of the Blockchain used. The blockchain used for the Smart Contract System is susceptible to attacks, including but not limited to double spending attacks, majority mining power attacks, selfish mining attacks, and rare condition attacks. Any successful attack presents a risk to the Smart Contract System, the expected proper execution and sequence of token transactions, and the expected proper execution and sequence of contract calculations. You understand and agree that the network of miners will ultimately control the contributions and deliveries of virtual currencies through the Smart Contract System, and that the majority of miners may agree at any time to make changes, updates, modifications or effect a deletion. or the destruction of the Smart Contract System, and that such a scenario could lead to virtual currencies losing value and/or intrinsic functionality.
• Incompatible wallet service risk: The wallet service provider used to contribute and receive virtual currencies must comply with the ERC20 token standard to be technically compatible with the EthicHub service. Failure to ensure such compliance may result in you not gaining access to your virtual currencies.
• Risk of abandonment/lack of success: the collaborative lending service through smart contracts and the development of the EthicHub platform may be abandoned for a number of reasons, including but not limited to lack of public interest, lack of commercial success or perspectives (for example, caused by competing projects), or a very negative evolution in defaults leading to the collapse of the compensation system and the loss of investors en masse. If we cannot continue with the project, it is very likely that non-payments will increase substantially since one of the payment motivations of the cooperatives with which we work is that each year they can access more financing.
• Risk of dissolution of the EthicHub or the network: it is possible that for various reasons, including but not limited to, an unfavorable fluctuation in the value of cryptocurrencies (or other cryptographic and fiat currencies), decrease in the usefulness of virtual currencies due to poor adoption of the EthicHub platform, lack of business relationships, intellectual property challenges, that the EthicHub Platform may no longer be viable to operate and that EthicHub may dissolve and not be able to continue the development of its Platform.
• Risk of Uninsured Loss: Unlike bank accounts or accounts at other financial institutions, virtual currencies used for the provision of the service are not insured unless you specifically obtain private insurance to insure them. Therefore, in the event of loss or loss of utility value, there is no public insurer or private insurance contracted by EthicHub to offer you a remedy.
• Tax risks: The tax description of virtual currencies is uncertain. You should seek your own tax advice in relation to the acquisition, storage, transfer and use of virtual currency, and the tax consequences that may arise, such as transfer taxes, value added tax, income taxes and similar taxes, levies, charges and tax information requirements.
• Risks arising from the market in which the EthicHub Platform operates: The crowdfunding market and, by extension, the EthicHub Platform, is subject to a variety of laws and regulations, competition, KYC/AML and customer due diligence procedures, privacy and protection of data, consumer protection, data security and others. These laws and regulations, and the interpretation or application of these laws and regulations, may change. Additionally, new laws or regulations affecting the EthicHub Platform could be enacted, which could affect the usefulness of virtual currencies used in the service offered by the EthicHub Platform. Additionally, users of the Platform are subject to or may be adversely affected by industry-specific laws and regulations or licensing requirements. If any of these parties fail to comply with any of these license requirements or other applicable laws or regulations, or if such laws and regulations or license requirements become stricter or otherwise expanded, it could adversely affect the EthicHub Platform and the virtual currencies used in the service, including their functionality to obtain or provide services within the EthicHub platform.
• Risks associated with the development and maintenance of the EthicHub Platform: The EthicHub Platform is still under development and may undergo significant changes over time. Although we intend for the beta collaborative lending service and the Platform to operate as described in these T&C and its Addendum, and we intend to take commercially reasonable measures to achieve this, we may need to make changes to the specifications of the service or the EthicHub Platform for various legitimate reasons. In addition, we may not be able to maintain full and effective control over how other participants will use the Platform, what products or services will be offered through the Platform by third parties. This could create the risk that the service or platform, developed and maintained, may not meet your expectations at the time of contracting the service. Furthermore, despite our good faith efforts to develop and participate in the EthicHub Platform, it is still possible that the EthicHub Platform may not be properly developed or maintained, which may have a negative impact on the EthicHub Platform and the service. hired.
• Competing Platforms Risk: Alternative platforms may be established that use the same open source code and underlying protocol as the EthicHub Platform and attempt to facilitate services that are materially similar to the services offered by or within the EthicHub Platform. The EthicHub Platform may compete with these alternatives, which could have a negative impact on the EthicHub Platform and the service.
• Risk of default by borrowers. There are many factors that can lead to default, especially poor selection of borrowers by the Auditor and risks due to the borrowers' agricultural activity, such as weather or pests.
• Risk of malicious borrower. No matter how good filters EthicHub or its audit partners apply for borrower selection, it is impossible to guarantee that they will always act in good faith. An act of bad faith on the part of the local nodes can lead to a total non-payment of the loans, among other reasons because the project has been falsified.
• Exchange rate risk. Since the loans are denominated in a stablecoin linked to the dollar, if it were to devalue significantly, the investor could suffer losses even if the borrower pays the principal and interest of the loan on time and in due form.
• Unforeseen risks: Cryptographic tokens like ETHER are a new and untested technology. In addition to the risks set out in this SINGLE ANNEX to these T&Cs, there are other risks associated with your acquisition, storage, transfer and use, including those that EthicHub may not be able to anticipate.