Is This 1 Existential Risk to Bitcoin a Reason to Buy Zcash Right Now?

Bitcoin (CRYPTO: BTC) has a security problem that isn't going away, and it just got harder to dismiss.

On March 31, Google's Quantum AI research team published a white paper showing that future quantum computers could crack the cryptography protecting Bitcoin's wallets using far fewer resources than previously thought -- and that such machines may arrive sooner than the market has priced in. No quantum computer capable of this exists yet, but if it did, it'd represent an existential threat to Bitcoin. And that's worth thinking about.

Meanwhile, another coin, Zcash (CRYPTO: ZEC), which shares most of Bitcoin's supply policies, is meaningfully further along in preparing for this threat. Is that a reason to buy it right now?

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Bitcoin's defenses are barely starting to organize

According to the new research, the cryptography securing Bitcoin wallets could be broken by a quantum computer with roughly 20 times fewer physical qubits than what was previously estimated.

In short, if this is correct, a quantum machine running the newly refined attack could crack the coin's encryption in about 9 minutes. Bitcoin settles a newly mined block every 10 minutes, which means an attacker could theoretically intercept any set of transactions in progress and reroute them as desired, perhaps to their own wallet. If that were to be confirmed as happening, it'd almost certainly spark a mass exodus from the coin, and its price would collapse, potentially irreparably.

So far, Bitcoin's main response to this serious threat is a Bitcoin Improvement Proposal (BIP) called BIP-360, which is now under formal evaluation by the developer community. It proposes introducing a new output type for transactions that removes a vulnerability created by a prior upgrade, which would make performing a quantum attack marginally more difficult.

BIP-360 is a preparatory measure for future preventive actions rather than a solution on its own. It does not replace Bitcoin's vulnerable elements with quantum-resistant alternatives. A full transition to post-quantum cryptography would require formulating, evaluating, and then implementing additional proposals, which would only be possible by forming a broad consensus among all of the key stakeholders involved, including miners and node operators. One of the developers involved with BIP-360 said that the entire process could take around seven years in total.

Given the findings by the research team, Bitcoin may not actually have that much time before a real quantum attack is possible to perform. But there's another coin that's planning to adapt faster.

Where Zcash fits in

Zcash forked from Bitcoin's codebase in 2016, and it uses the same 21 million-coin supply cap, proof-of-work (PoW) mining, and a halving schedule that is the same as Bitcoin's four-year cycle. By design, it's essentially Bitcoin with an added layer of optional privacy features that make it possible to transact without broadcasting the details.

On the quantum front, Zcash has a structural advantage. The white paper notes that Zcash's 75-second block time makes transaction-interception-type quantum attacks far less viable.

Still, Zcash is not fully quantum-safe today. It's known that the coin's transaction privacy features are theoretically breakable via a quantum attack, thereby allowing an attacker to understand who sent what to whom.

But Zcash differs significantly from Bitcoin in terms of the clarity of its roadmap for eventually becoming quantum-resistant. Its core development team is actively testing quantum-resistant cryptography, and its next upgrade is targeted to hit the mainnet by the end of 2026.

Should you buy Zcash?

Zcash's quantum security positioning is meaningful, but it's not a reason to buy the coin on its own, nor is it any kind of reason to sell Bitcoin to buy Zcash.

Bitcoin's network effects, liquidity, and institutional adoption are so far ahead that no single vulnerability is likely to dislodge it. The more vulnerable it ends up looking relative to quantum computers, the more its powerful holders, many of which are financial institutions, will push for adaptations that mitigate the risk. And even in light of the new research, quantum computers are an emerging technology that still aren't expected to be capable enough to attack cryptocurrencies for years.

Zcash is a worthwhile asset to own in your crypto portfolio, and it'll likely become quantum-resistant before Bitcoin does. It's just that it's a lot less established than Bitcoin, and it's also a lot riskier regardless of its advantages in a fairly niche technical domain.

Alex Carchidi has positions in Bitcoin and Zcash. The Motley Fool has positions in and recommends Alphabet and Bitcoin. The Motley Fool has a disclosure policy.