Cardano Might Get Ahead of This 1 Big Risk. But Is It a Buy?

Cardano (CRYPTO: ADA) might have a significant lead in a domain that most other cryptocurrencies are only starting to think about. That domain pertains to a certain risk that could crack the cryptography that protects today's blockchains from intruders, hackers, and other bad actors.

But does mounting a defense against a potential risk that's far in the future make this coin worth investing in right now?

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This risk is easy to brush off today, but it might be deadly in the future

Today, blockchains rely on cryptographic security to guarantee that investors' funds remain secure in their wallets, and that decentralized finance (DeFi) applications can safely transact without the fear of having their ciphers broken. Broadly speaking, encryption is not an issue that investors tend to care about in the context of buying coins. But, under one specific scenario, it could become a major differentiator, and in that scenario, Cardano would likely be one of the market's leaders.

Today, quantum computers are more like science experiments than they are powerful code-breaking machines that could threaten blockchain security. They will almost certainly only get more advanced from here on out. And once they're past a certain power threshold, the risk that such technology would pose to cryptocurrency encryption schemes will become alarmingly high. Theoretically speaking, a sufficiently powerful quantum computer wielded by a malicious actor could compromise a chain's encryption and steal vast sums of crypto, reroute transactions, and generally create the kind of chaos that's capable of sending the value of the entire sector toward zero.

Such a risk is not anywhere close to being realized, and it won't be for years, if it ever is. It's probably a problem for the 2030s. Still, some chains are delaying the transition to post-quantum cryptography (PQC) that would be resistant to these attacks, while others, like Cardano, are making preparations well in advance of the threat.

If these quantum-related risks are ever realized, these early protective steps will pay off, as insecure chains will be abandoned rapidly to protect investors' capital. Money will flow to safe harbors, specifically the chains that are thought to be quantum-proof. Once that capital is in place, it might not leave. It could take many months or perhaps even years for the laggards to adapt to the new threat environment, especially if their core tech development resources are limited, which is the normal state of affairs with most altcoins.

Earlier this year Cardano announced its quantum computing resistance strategy. It's collaborating with experts in the field, initiating several research studies to identify and plan around its vulnerabilities, and it already has a timeline and general strategy for implementing its quantum resistance features during the next three or so years. Per its founder, Charles Hoskinson, following the plan will result in the chain being protected before the earliest possible onset of the threat, which could occur as soon as five years from now under the right circumstances.

It's important to recognize that there haven't been any actual updates made to Cardano's chain yet. Still, its peers in cryptocurrency are nowhere near as advanced or as organized in terms of their planning or approach, nor have any of them implemented anything to guard against the looming quantum codebreaking threat as of yet. So Cardano is significantly ahead of the game here.

Keep an eye on this issue

Does its leadership on the quantum computing security issue make Cardano a coin worth buying today and holding through the next decade, when its investments in post-quantum computing encryption are the most likely to start paying off?

No, not exactly. Overall the investment thesis for buying Cardano is not very strong because it's currently being overshadowed by Solana, which is much larger by market cap as well as faster and less expensive to lose.

However, as mentioned previously, if quantum computing risks arise sometime in the next decade or so, and if other chains like Solana continue to refuse to adapt ahead of when it's needed, Cardano will fare quite well in the long term. The issue is that the threat is too far on the horizon to convince investors that it's financially relevant today, and the only thing that will help that change is time.

So keep an eye on Cardano as it continues to lead the market in the domain of forward-thinking security adaptation. If quantum computing becomes a larger topic of conversation during the next few years, and it almost certainly will, it will be an important reminder that this coin is well positioned to protect investors' value, and its price may rise accordingly. Until then, appreciate that your investments elsewhere will probably have higher returns, even if they're potentially exposed to an emerging risk.

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Alex Carchidi has positions in Solana. The Motley Fool has positions in and recommends Cardano and Solana. The Motley Fool has a disclosure policy.