Industry Committee on Oct. 27th, 2022

[Pascal St-Jean]

I'd be happy to have a two-hour discussion just on all these different questions, so I won't try to answer them all in a few minutes. Technological efficiencies resolve problems over time, so we are seeing all these problems getting resolved. There are things that existed multiple years ago that are getting faster and better. Understanding consensus mechanisms matters, because they are based on what you are trying to secure on the blockchain. Proof of work matters if you are trying to secure billions of dollars of monetary value; proof of history is much faster if you are trying to create a competitor to Visa, for example.

Understanding these.... They are not all built the same, nor are they all trying to solve the same problem, but I always go back to the root answer. We are seeing an asymptotic evolution in the technology that is making all of these better, faster and more efficient. All these problems will be resolved within the next five years, if not sooner.

[The Chair, Liberal, Joël Lightbound]

Thank you very much, Mr. Gaheer.

If I may, Mr. Lemire, I have one question.

Ms. Osowska, you mentioned certain statistics in terms of the number of transactions per second that proof of history allows us to do. Can you repeat that?

[Justyna Osowska]

I believe that statistic is 65,000 transactions per second.

[The Chair, Liberal, Joël Lightbound]

By way of comparison, how many transactions are done by, for instance, Visa or Mastercard?

[Justyna Osowska]

It's basically the same.

[The Chair, Liberal, Joël Lightbound]

It's basically the same.

[Justyna Osowska]

Yes.

[The Chair, Liberal, Joël Lightbound]

Thank you.

Go ahead, Mr. Lemire.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

I'd just like to say that we couldn't hear the number of transactions in French.

Ms. Osowska, would you please repeat that to ensure we also understood in French.

How many transactions can potentially be done per second?

[Justyna Osowska]

It's 65,000.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

Great, thank you.

Mr. Chair, do you want to speak?

Were you thinking about managing your time for asking questions?

This is your study.

[The Chair, Liberal, Joël Lightbound]

Out of my considerable generosity, I prefer to let the members ask their questions, and, if any time remains at the end, don't worry, I'll nab it.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

I think it might be interesting for you, as the chair, to have a separate round of questions. I could second that request.

I'll continue with Mr. St-Jean. The representatives of Osler, Hoskin & Harcourt LLP could also add to your remarks.

Getting back to the energy-consuming aspect associated with cryptocurrencies and thus perhaps with blockchains, according to Hydro-Québec, there are 80 cryptocurrency mining businesses in Quebec, including Bitfarms. Those businesses apparently consumed 1.1 terawatt-hours in 2020. That's nearly twice what they used in 2018, and we can expect their consumption will keep increasing. This is equivalent to the amount of energy used by 100,000 homes, or 0.5% of all the energy Hydro-Québec sold in 2020.

Can we expect this upward trend to continue?

Why is this technology so energy-intensive, and could we derive greater benefits from it, in particular by heating the basements of village churches, for example?

[Pascal St-Jean]

That's exactly where it goes, literally.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

Is that so? All right.

[Pascal St-Jean]

Here are two examples.

We're going to go back to the technological aspect. Technology improves and things become more efficient.

The energy sold by Hydro-Québec and many other companies in Alberta and elsewhere is surplus energy that's negotiated with consumer businesses. Whether the customer is a cryptocurrency miner or any other business, it's up to a supplier such as Hydro-Québec to negotiate rates and energy consumed. A large amount of energy has already been negotiated, and certain businesses have managed to draw more.

I can give you an example of a company that I know very well, SATO Technologies Corp. It's a Quebec company that mines cryptocurrency and has established itself in the communities where it operates and offers waste heat turbines, for example.

Cryptocurrency mining uses energy and produces heat, which is redistributed to feed heating systems that serve the city. This is true. The business works with the city to create an ecosystem.

This very efficient reutilization of energy creates value for the business and the cryptocurrency mining system, which in turn creates new businesses and, at the same time, helps establish a modern infrastructure that the city otherwise would not have.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

What city is it?

[Pascal St-Jean]

I can send you the name of the city…

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

That's fine.

[Pascal St-Jean]

I heard about that during supper the other day and I was very impressed. I can put you in touch with the head of that business.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

This underscores the importance of ensuring that high-speed Internet is available everywhere, in every city and town.

Thank you, Mr. St-Jean.

[The Chair, Liberal, Joël Lightbound]

Very well done, Mr. Lemire.

I now give the floor to Mr. Masse for a final round of questions.

You have two and a half minutes.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair. I'll cede my time to you. You can have my time. I want you to get in there. It's your study, and I respect that.

[The Chair, Liberal, Joël Lightbound]

It's the committee's study, but of course I appreciate the committee's willingness to go along. I know there is a lot of interest.

However, I don't have that many questions. For the benefit of members and the public, you mentioned, Mr. St-Jean, smart contracts. It's not necessarily clear in most people's minds what that means and what the use cases are for smart contracts.

[Pascal St-Jean]

I'd absolutely be happy to elaborate a little bit on that.

When we were talking about decentralized finance, I was giving you the example of this peer-to-peer network that is enabling people to participate in loan generation for a down payment towards a mortgage. Certain terms need to be there. If we work with a bank or a centralized organization, there's a decision-maker. That tends to be a human being who evaluates your creditworthiness, my ability to lend, your ability to repay and so on. They make a decision on that ability to happen.

A smart contract is essentially a programmatical way of entering all this information into a contract that is basically observed and triggered based on data that gets provided. Let's say we were to go online and generate a contract together: I'll loan you x amount for x percentage, and you will give me x amount in collateral, and if you pay it back by a certain date, you'll get your collateral back. This is all triggered by computer code, which is a smart contract. That enables a lot of innovation of peer-to-peer finance, which is decentralized finance.

That's one of multiple examples. For example, if we were to do tokenized real estate and there was to be a yield generated from the rent, we would distribute that automatically, based on the rules of ownership, through smart contracts. It a way of using software and information to trigger specific actions.