I think OP is asking "In the worst case scenario of a malicious instance owner that is able to fork the Lemmy codebase (so could disable hashing) and intercept and record all communications going to and from their instance, what risk do I have as a user of that instance?"
The answer of course is yes, in theory a malicious instance owner could see the password you use and can see all your communications, votes, what you look at, etc. So use a unique password for that instance, and don't use the instance for private communucations whose interception could seriously harm you.
Basically don't use drugs or you'll destroy your life.
Sex was avoided as a topic, but we were taught that premarital sex is a sin. I was also teased as a kid about having crushes on girls (I'm male), despite my adament (and truthful) denials, and othertimes they'd joke that I'd change my mind once I was older. I won that though - turns out I was gay and never did change my mind.
As for LGBT issues, it was so taboo / not talked about that I didn't even connect my confusing feelings for male classmates with me being gay until I was 18. I thought everyone felt like that and was frustrated when they wouldn't reciprocate those emotions back.