Law Times

Law Times • January 29, 2018 Page 7 www.lawtimesnews.com Canada, centre of the Bitcoin mining universe? BY JEFFREY LEM C anada is renowned as one of the most resource-rich nations in the world and an undisputed capi- tal of the extractive industries worldwide, whether such extraction is of gold, uranium, oil or other resources, both here and abroad. Curiously enough, world events may make Canada a hotbed for a new kind of mining — crypto-currency mining. Whether it is Bitcoin, Ethereum, Ripple, Litecoin or one of the almost 1,000 other crypto-currencies on the market today, virtual currencies are certainly now all the rage, both in the technological world and in financial circles. But there is a peculiar relationship between crypto-currencies and real estate, particularly older, aging in- dustrial infrastructure. Like many things we perceive as virtual and in the cloud, even crypto-currencies have a bricks-and- mortar underpinning. To understand the leap from Bitcoin to real estate, one first has to understand basically how crypto- currency transactions are validated online. IT professionals will cringe at this much-pared-down description of the blockchain validation process, but for our purposes, the process can be quite simple. A broadband connection brings a crypto- currency transaction to a computer. The computer then tries to solve a mathemati- cal puzzle associated with that crypto- currency transaction. If the computer suc- cessfully solves the puzzle, it transmits the solution back through the broadband con- nection, and the transaction is validated and confirmed as authentic across a great number of other computers (the so-called "distributed ledger"). Most importantly for our purposes, the computer that solved the puzzle gets a commission, expressed as a minuscule percentage of the value of the crypto-currency transaction that it just validated. This process is called "crypto- currency mining" and the computers that solve these puzzles are called "mining rigs." Mining rigs can be situ- ated anywhere and be almost any type of computer. One of the touted benefits of crypto- currencies is that it does not need a centralized govern- ment or institution to verify each transaction. Indeed, at least in the early days of crypto-currencies, much of the crypto- currency mining was done by individual people, using mining rigs that were little more than laptops from a big-box store. Alas, that was then, and this is four years later. Today's crypto-currency min- ing rigs are specialized computers (smaller than a bread box, with no monitors and no keyboards). Furthermore, while there are still some smaller crypto-currency miners out there, the days of the small crypto-currency miner seem gone — the industry has gone big rather than gone home. Modern crypto-currency mining is now done in giant "crypto-currency min- ing farms" — data centre-like warehouses with thousands upon thousands of min- ing rigs lined up in racks from f loor to ceiling. Like with many other things in the world, size matters, and crypto-currency mining farms have grown in size in order to realize economies of scale. Now for the bricks-and-mortar nexus and why these crypto-currency mining farms translate into demand for Cana- dian real estate. Thousands of mining rigs lined up in racks from f loor to ceil- ing require a lot of electricity — both to power the mining rigs themselves and to cool the tremendous amount of heat that each mining rig generates. Furthermore, crypto-currency mining farms need reli- able broadband with large bandwidth ca- pacity. Finally, as an adjunct to the cooling issue, most of these crypto-currency min- ing farms are better situ- ated in colder climates where cooling is naturally that much more affordable. Historically, almost all large-scale crypto-currency mining farms were in China. There are probably historical reasons for this: cheap, state- subsidized electricity, cold climates in the north and western parts of the country and the relatively cheap sup- ply of leading-edge mining rigs (almost the entire world's supply of specialized crypto-currency mining rigs are made in China by a handful of specialty manufac- turers, and the number of these mining rigs that are distributed outside of China is minuscule compared to those bought up by the Chinese domestic market). It has been widely reported, however, that the Chinese government has been clamping down on the expansion of do- mestic crypto-currency mining farms. This has set the stage for almost all of the expansion of crypto-currency min- ing farms to take place outside of China, and Canada fits the bill surprisingly well as a mining farm host: relatively available broadband, relatively affordable hydro and relatively cold climate. Most of the Chinese crypto-currency mining farm clients with which this au- thor has dealt seem to be migrating to hosting and co-location facilities in Que- bec, both because of that province's rela- tively economical electricity prices and because of Quebec's public openness to doing business with these Chinese entre- preneurs. To a lesser degree, Chinese mining farms have also been seen conducting dili- gence in Manitoba and British Columbia in search of cheap electricity and reliable infrastructure. Ironically, although crypto-currencies are the absolute bleeding edge in the digi- tal revolution, the facilities that make ideal crypto-currency mining farms are sur- prisingly low-tech and capital unintensive. Some Canadian landlords have described them as nothing more than old warehous- es with a lot of computer racking, a lot of fans and a lunchroom. The key, it would seem, is to first find reliable, affordable power and then find any sort of commer- cial or industrial infrastructure that can fit racks upon racks of computer hardware. This is one of the greatest opportuni- ties for Canada's real estate and power in- dustries and the lawyers who service those industries. Older industrial and commer- cial facilities that are in need of retrofitting and renovation can easily be re-tasked to capitalize on this nascent industry. The very buildings for which Canada cur- rently has little use (including derelict or underutilized power plants, substations and industrial facilities) can be re-tasked to crypto-currency mining with almost no capital outlay whatsoever. While naysayers tend to liken crypto- currency investment to the great tulip spec- ulation mania in 1600s Europe, it is hard to deny that the underlying technology — blockchains — probably has some legs, and it is clear that blockchain technology requires mining farms to power it. Canada has all the right ingredients to make it truly the crypto-currency mining hub of the world, and only time will tell if Canada can capitalize on this new surge in demand for these mining farm facilities. LT uJeffrey Lem is the director of titles for the province of Ontario and an elected bencher for the Law Society of Ontario. This article ref lects the personal views of the author alone. Improving notification around class actions BY SHANE O'HERLIHY T here are literally hundreds of ongoing and recently settled class actions taking place in Canada today that directly affect the rights of Ontario residents. It seems though that the methods used to notify potential class action participants of these lawsuits are sorely lacking in scope and detail, compared with the for-profit notification model employed in the United States. Many Ontarians may be missing out as a result. Today, Ontarians are notified of class action law- suits by a patchwork system consisting of newspaper articles, direct mailings and information found on the websites of law firms and settlement administrators. In class actions such as the case where the federal government lost a USB containing the confidential personal information of hundreds of thousands of Ca- nadians, potential defendants already know the identi- ties of the class members and the courts can order them to notify potentially damaged parties through the mail. However, the same cannot be said for consumer protection and product liability cases, which have the potential to affect millions of people but are not nec- essarily high-profile cases attracting media attention. Unfortunately, both the government and legal com- munity's approach to solving this particular access-to- justice problem has been mediocre at best. Firstly, Ontario does not have a mandatory central register for class actions like Quebec, which falls under Article 1050.2 of the province's Civil Code. In the rest of Canada, including Ontario, law firms are merely encour- aged to submit information to a voluntary database run by the Canadian Bar Association. As a result, the Nation- al Class Action Database run by the CBA lists only some of the class actions operating in Ontario today. Both the mandatary database in Quebec and the CBA's optional one really only serve as repositories for the media to pick out what it believes to be the top pub- lic interest stories. One can't rely on the media to report on all of the specific cases that apply to a given person's particular situation. The United States has a fresher and more realistic approach to notifying people about class action settle- ments. There are a number of privately run websites operating south of the border that cash-strapped in- dividuals use to give them the latest news on ongoing class action litigation, current settlements and sub- mission deadlines. There is an economic incentive to having a well-run website providing worthwhile and up-to-date information about a potential claimant's chances to acquire compensation in a consumer pro- tection matter. Nothing like this operates in the private sector in Ontario today. One reason why class action notification websites have not been a fit in Ontario is that they are better suited to a jurisdiction where class litigation has historically been an instigator for social change and consumer protection in a much larger and more integrated nation-state. Class action litigation has been a mainstay in the United States since the 1960s, and more so than anywhere else in the western world. Meaningful class action litigation has only been around in Ontario for approximately 20 years. In addi- tion, the ease with which people can sign up for claims on class action notification websites could further persuade ordinary people to submit false claims from the comfort of their own homes. Nonetheless, we cannot ignore the fact that class actions are becoming a larger and more important ve- hicle for achieving justice in consumer protection mat- ters in this province. Large corporations are genuinely fearful of years- long, multi-million-dollar class action lawsuits, es- pecially when compared to the trivial fines and other toothless penalties issued under the auspices of the Competition Act and the Canadian Code of Advertis- ing Standards. From this perspective, class actions can be seen as a wonderful development in our jurispru- dence, but it is imperative that the general public's full participation take place or else their value becomes di- minished. On that note, Ontario law firms may wish to take the initiative and channel their resources by creat- ing the country's first broad-based class action notifi- cation website. There are enough class action lawsuits in existence now to warrant such a project. Websites operating in the United States have shown that serving the public interest is not strictly within the governmental sphere and, in fact, private sector enti- ties can often be better trusted to take on these sorts of tasks. There has always been a market demand both for information and access to justice. It is time to shed our fears about "Americanizing" our province's legal culture and better connect the Ontario public to class action counsel and settlement administrators. LT uShane O'Herlihy practises civil litigation and provincial offences law in Toronto. He can be reached at 416-824- 5914, or soherlihy79@gmail.com. u SPEAKER'S CORNER COMMENT The Dirt Je rey W. Lem Je rey W. Lem

• Cover