Matthew Ferranti, an economics professor at Harvard University recently published a research paper in which he advises central banks to pile on Bitcoin. His findings suggest that it would be beneficial for all central banks to hold (or as the crypto community would say “hodl”) at least a small amount of cryptocurrencies.
Ferranti also argues that the central banks that are facing the prospect of sanctions in the future would need to stack on Bitcoin. Harvard’s Ph.D. candidate believes that such central banks should focus on Bitcoin rather than gold, which is what those under embargo risks have been doing in recent years.
Bitcoin is Superior to Gold?
The obvious path for a country facing the risk of US sanctions is to obtain as much gold as possible. As per Ferranti’s research, the countries under this sort of risk have increased their gold reserves significantly in the period between 2016 and 2021.
However, doing it just isn’t practical for some countries. The fact that gold is a physical commodity, getting ahold of it could be difficult. Further, the cost of transportation and security would take a huge toll on the economy.
On top of everything, it may take too much time to get ahold of gold, and time is a luxury that countries facing sanctions do not have.
Ferranti’s reasoning is that for all of these reasons, gold isn’t a good solution. Bitcoin, however, could solve all of those problems. The digital currency is easy to obtain from different sources. A central bank may decide to buy Bitcoin from existing “hodlers” or invest in Bitcoin mining equipment in order to create digital coins on its own.
Bitcoin Transactions are (Almost) Impossible to Sanction
Considering that Bitcoin is a proof-of-work blockchain, Bitcoin transactions are practically impossible to censor. This system works in such a way that only when “majority hash power” is achieved, the censor has the ability to block Bitcoin transactions.
In layman’s terms, this means that the censor needs to be in control of 51% of the computing power of all Bitcoin miners in the world. As there are more than 1,000,000 miners scattered around the planet, achieving complete control of Bitcoin transactions is practically impossible.