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Great Debate: Business Professors Spar over Cryptocurrency

William Johnson, Jack Wilson Square Off on Viability of Digital Currency, Blockchain

Two men pose for a photo while standing near a flag and a window Photo by Ed Brennen
Jack Wilson, president emeritus of the UMass system, debated Assoc. Prof. of Finance William Johnson, his former student at RPI, on the future of cryptocurrency.

11/04/2022
By Ed Brennen

Has cryptocurrency, which lost over $2 trillion in total value this year after hitting a peak of $3 trillion last November, been exposed as a fad — or worse, a fraud? Or is digital currency, and its underlying blockchain technology, really the financial future?

Those questions were at the center of a recent debate between William Johnson, associate professor of finance in the Manning School of Business, and the recently retired Jack Wilson, president emeritus of the UMass system and former distinguished professor of higher education, emerging technologies and innovation.

Hosted by the Global Entrepreneurship Exchange (GE2) program and the Jack M. Wilson Center for Entrepreneurship, the debate drew nearly 80 students and faculty to Alumni Hall (and close to 100 more online). It was moderated by GE2 Director William Yelle.

The debate pitted student against teacher — Johnson had Wilson as a professor while pursuing an engineering degree at Rensselaer Polytechnic Institute 30 years ago.

“I’m honored to be up here with someone who’s worked so hard for this community,” said Johnson, who teaches a graduate-level course on cryptocurrency and argued in support of the technology. 

While acknowledging that people shouldn’t invest heavily in something as speculative as cryptocurrency (“As a small part of your portfolio, it’s fine. … I believe in diversification.”), Johnson said digital currencies do serve a purpose. Among them, he said, is the ability to quickly transfer money by sidestepping cumbersome banking networks, as well as access to financial services for people in underdeveloped areas.

“There are real problems to be solved, and they can be solved using these technologies,” he said.

Wilson countered that most cryptocurrencies are nothing more than a Ponzi scheme — a form of fraud that pays profits to early investors with funds from more recent investors, leaving the final investors with no funds left to compensate them. He cited the recent bankruptcy of crypto platform Celsius, which cost investors $5 billion, as a prime example.

A man speaks into a microphone as another man looks on Photo by Ed Brennen
Assoc. Prof. of Finance William Johnson, foreground, makes a point in favor of cryptocurrency while his debate opponent, Jack Wilson, looks on recently at Alumni Hall.
“If it looks like a duck and quacks like a duck, then it probably is a duck,” said Wilson, who has compiled over 100 pages on his personal website of examples of crypto fraud, scams and bankruptcies, along with warnings from financial experts such as Warren Buffett and Nobel Prize-winning economist Paul Krugman about the technology.

Wilson said skeptics such as himself often hear a frequent retort from crypto fans: “OK, Boomer. You’re too old, and you don’t understand this new thing.”

“But the sooner it goes away, the better,” said Wilson, who conceded that digital currencies are inevitable, but will be “backed by the full faith and credit of stable, reliable governments or organizations and follow good financial regulations.”

While there have been high-profile cases of cryptocurrency being used in criminal activity, such as last year’s Colonial Pipeline ransomware attack, Johnson cited statistics to put them in perspective. He noted that of $9.3 trillion in crypto transactions last year, $14 billion was lost in fraudulent transactions, money laundering and other criminal activities, or 0.15% of transactions. He compared this to 0.12% for checks ($12.4 trillion in transactions; $15.1 billion lost in fraud) and 0.07% for credit cards ($42.3 trillion in transactions; $27.9 billion lost in fraud).

People sit in chairs and listen to a presentation in a room Photo by Ed Brennen
The debate format was popular with many of the students in attendance.
“It’s not a lot worse for cryptocurrency than these other technologies; it’s just a much newer technology,” said Johnson, who advocated for the enforcement of current laws and passage of new regulations when necessary.

Johnson also compared this year’s crypto crash to the burst of the dot-com bubble in the late 1990s, when Amazon, eToys, Webvan and Pets.com lost $5.7 billion collectively. Today, Amazon is worth around $1.5 trillion, while the other three no longer exist.

“Some cryptocurrencies will fail terribly, just like IPOs in the dot-com boom, but the markets are good at figuring this out,” he said.

Wilson pointed out that mining for cryptocurrency — the complex process in which thousands of powerful computers race to solve a mathematical puzzle to earn the right to validate a transaction on a blockchain network and add it to a distributed ledger, earning a newly minted digital coin in the process — uses more energy “than many medium-sized countries,” mostly by burning fossil fuels.

Wilson added that blockchain is “a cool technology — a neat, decentralized database, basically,” but that it cannot scale to substantial use without burning “horrendous” amounts of energy.

A man at a podium gestures with his hands to two men sitting near him Photo by Ed Brennen
William Johnson, left, gestures while making a point to Jack Wilson, right, and debate moderator William Yelle.
The environmental impact of crypto and blockchain is real, Johnson said, but it’s a problem that can be solved. He noted that when the Ethereum blockchain switched on Sept. 15 from a “proof-of-work” protocol, which requires thousands of computers, to a “proof-of-stake” protocol, in which validators are chosen randomly, there was a 21% drop in the consumption of electricity by all cryptocurrencies.

Seeing how much energy was used in crypto mining was “eye-opening” for Jessica Borst, a senior business major from Townsend, Massachusetts. She said she came into the debate “a little partial to crypto — I think it’s the future of currency,” so she leaned toward declaring Johnson the winner.

Senior business major Jasmine Varona, who has dabbled in small crypto investments, said Johnson’s views aligned more with “the new generation.” But hearing Wilson compare it to a Ponzi scheme made her second-guess herself.

“I never saw crypto in that perspective. I’ve always seen it as the future and never acknowledged the downside,” the Haverhill, Massachusetts, native said. 

Regardless of which side they thought won, students enjoyed hearing two diametrically opposed viewpoints on cryptocurrency in a debate format.

“I loved it. I was entranced the entire time,” said Kevin Bragg, a senior information technology major from Pepperell, Massachusetts.

Bragg said he invests small sums of money — $10 or $20 — in different cryptocurrencies just to see how they work. In doing so, he’s fallen victim to several of the scams that Wilson mentioned. But Bragg doesn’t see that as a deal-breaker, noting that criminal organizations existed long before the first cryptocurrency, Bitcoin, came along in 2009.

“Cryptocurrency didn’t create these crimes, and it’s not going to stop it,” he said, adding, “Cryptocurrency is not going away.”