“We could have the banking industry—which is incomplete in a lot of developing countries—skip some of the steps we went through in the West, and go right to blockchain technology,” said Paul Johnson, a 35-year veteran of the investment community and an adjunct professor at the Gabelli School of Business.
Johnson, a senior advisor with the financial services firm Harbor Peak, spoke to 140 students and alumni of diverse academic and professional backgrounds at the Lincoln Center campus as part of the Fordham at the Forefront lecture series.
In the lecture, titled “Bitcoin, Blockchain, and the Future of Business,” he described the new capabilities brought about by blockchain, a dispersed online system in which transactions are made both more secure and more transparent because information about them is open and stored across the network.
In the developed world, blockchain will take costs and layers out of all sorts of transactions, such as real estate and importing and exporting, Johnson said. Much of its impact will be behind the scenes, he said.
And in the developing world, “it’s quite possible [blockchain]it will become the backbone to a new banking institution,” he said. “Much of its capabilities are yet to be seen.”
He added that it’s too soon to translate blockchain into money-making opportunities, and noted that some aspects of blockchain—such as how to resolve disputes—still need to be ironed out.
“There’s a difference between recognizing its importance and then trying to monetize the trend,” Johnson said.
Acknowledging the buzz around bitcoin, a digital currency used for blockchain transactions, Johnson advised investors to be cautious, referring to it as a “cultural artifact—a collectible like a Jackson Pollock painting”—rather than a currency.
“It has value because the community has given it value,” he said. “But it’s hard to determine the value of these things that have cultural appeal.”
Johnson offered similar advice about ICOs, or initial coin offerings, which are created through blockchain technology. Like an initial public offering, an ICO is a fundraising tool in which a company sells digital tokens to raise capital rather than issuing shares of ownership. So instead of acquiring equity in a company, purchasing ICOs is like buying a voucher for something that has a finite economic value—“a haircut, a movie ticket, or a ride on a ferris wheel,” for example.
“You can actually buy them, they look like bitcoin and are based on the idea that blockchain is really important,” he said. “That’s where ICOs are in the sweet spot of sucking people in. That causes me concern.”
Johnson attributed the bitcoin rage to “FOMO,” or the fear of missing out, a powerful emotional driver that moves many to make investment decisions without fully understanding what they are buying.
“It’s not some sort of magical currency,” he said, “and if you don’t know what you’re buying, you have the potential to lose a lot of money.”
One attendee, attorney Mike Krieger, LAW ’77, noted that blockchain could cut out the intermediaries in personal and business transactions, bringing “huge cost savings” but also “major declines in certain jobs related to work now done by these intermediaries.”
At the Gabelli School, Johnson teaches courses on digital currency, blockchain technology, and value investing. His students are working on a project called Jesuit Token that will use blockchain technology to promote community service University-wide. The goal, he said, is to incentivize and reward 25 million hours of community service in the next 20 years.