How Investing in This Altcoin Could Make You a Millionaire

Investing in Zcash (CRYPTO: ZEC) could make you a lot richer, and perhaps even a millionaire, but only if it repeats nearly the entire run Bitcoin (CRYPTO: BTC) has made since 2017, which is a little more likely than it sounds at first. Zcash's market cap was $21.5 billion as of Oct. 11, putting it right near Bitcoin's corresponding level in early 2017.

The coin's evangelists would like it if everyone called Zcash "Bitcoin with privacy." But the truth is that other coins have tried to walk in Bitcoin's shoes before, only to fall short. So let's take a hard look at Zcash's potential paths forward, and compare it to the also-rans.

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Many coins have sought to replicate Bitcoin's trajectory

Bitcoin's market cap first topped $20 billion in March 2017, and it's now worth $1.6 trillion.

If we extrapolate that same jaunt for Zcash, an investment of $10,000 would be worth about $789,000. So, you'd need roughly $12,700 invested for Zcash to make you a millionaire, and Zcash itself would need a $1.5 trillion valuation. The entire crypto market is currently worth close to $3 trillion, and Bitcoin makes up slightly more than half of that total.

Litecoin and Bitcoin Cash both pitched themselves as improved versions of Bitcoin, and both closely mimic its supply policy and mining, but they're still 84.4% and 92.2% below their all-time highs, which were set years and years ago now.

Is Zcash different enough to break the pattern?

Zcash will probably avoid the fate of Litecoin and Bitcoin Cash, even if it doesn't actually end up making people who buy it now into millionaires.

Bitcoin's climb was built on three things: a fixed supply, a reason to own it that nothing else offered, and on-ramps for big money. Litecoin and Bitcoin Cash copied the first and pitched cheaper payments as the second. Zcash matches Bitcoin on the first, has a far better answer to the second, and is starting to get the third.

In an August 2010 forum post, Bitcoin's pseudonymous creator, Satoshi Nakamoto, wrote that zero-knowledge (ZK) proofs could enable "a much better, easier, more convenient implementation of Bitcoin," but he couldn't see how.

When Zcash launched in 2016, it did so with those proofs at its core, letting its network verify payments between users without revealing who paid whom or how much. That combination of hidden payments and having most of the supply policies of Bitcoin, including a 21 million coin cap and halvings about every four years, is what could make Zcash extremely valuable.

People use those privacy features, too. 29% of Zcash's supply is stored in shielded, or private, addresses, and those private balances are held in ZEC itself.

Big money on-ramps are also now online. Grayscale's Zcash exchange-traded fund (ETF), the first to offer direct exposure to Zcash, began trading on Aug. 25.

As long as people have money, others will want to snoop on how it's held and spent. That keeps demand for financial privacy alive, and Zcash is built to meet it.

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