Bitcoin's (BTC -3.08%) scariest and most misunderstood long-term risk might also be its next big catalyst. It's currently priced at 49% below its all-time high near $126,100, and Capriole Investments founder Charles Edwards blames much of the gap on investors' fears about quantum computing.
In a conversation with Cointelegraph on July 24, Edwards pegged that fear discount at near 30%. Once Bitcoin's developers commit to a road map for fixing quantum computing-related security vulnerabilities, he expects that discount to vanish and for the price to jump by at least 10%. The catch is that publishing such a road map is harder than it sounds.
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A road map would sharply move the price
The core problem facing Bitcoin right now is that its wallets use encryption that, in theory, can be cracked by a sufficiently powerful quantum computer. No computers powerful enough to do that exist today. But they might exist in five or 10 years, and if they're used to hack people's wallets and steal their coins, it would trigger a sell-off of historic size.
To avoid that pitfall, Bitcoin's developers need to plan to upgrade the chain's encryption scheme for all newly created wallets, while also determining what to do with wallets that may be forgotten, abandoned, lost, or otherwise inaccessible to their rightful owners. That's no small issue, as Bitcoin's founder, Satoshi Nakamoto, is thought to still hold around 1.1 million Bitcoin. Leaving that stash vulnerable means someone with a quantum computer could steal it and sell it all to tank the coin's price, even if everyone else's funds are secure.
Having a public road map for the transition to post-quantum cryptography would turn that open-ended dread into the well-defined and fairly controlled risks of an engineering project. Edwards thinks that a clear plan would extinguish the fear about quantum computing "pretty much overnight."
CRYPTO: BTC
Key Data Points
So, why don't the developers just publish one?
Bitcoin's developers aren't a monolith, and there's a considerable period of discussion and consensus-building for every major change to the chain. Nonetheless, developers took a first step this year with BIP-360, a Bitcoin Improvement Proposal (a formal design document) that adds a wallet address type that would mitigate some of the risk posed by a quantum computer. But BIP-360 is still only a draft, and even if it's implemented, it would be only a step in the right direction, not a comprehensive solution.
Another proposal, BIP-361, from developer Jameson Lopp, would phase out vulnerable addresses over five years and then freeze any wallets that never migrate, Satoshi's included. One camp says the freeze denies a future attacker a multibillion-dollar prize. Another camp calls it unwarranted asset confiscation. There are problems and truths in both sets of arguments.
So, it isn't trivial to create a mitigation road map.
But given how challenging the entire process has been so far, and will probably continue to be, Edwards is almost certainly correct that having a convincing plan to deal with quantum computing is going to be a major catalyst for Bitcoin.
