Retired Lawyer
Independent Scholar
Community Leader
Mr. Dwor is a retired member of the Law Society of British Columbia. He is a member and leader of many professional, arts, and other community organizations, with a strong emphasis on charity and not-for-profit governance. The co-founder and chairman of the Canadian Academy of Independent Scholars, Mr. Dwor has also been a member of the Boards of Variety, the Children’s Charity (for 28 years); Osteoporosis Canada (for 6 years); and the Vancouver Children’s Festival (for 3 years). Mr. Dwor recently served a three-year term as a member of the Board of Management of the Canada Revenue Agency where he was Chair of the Advisory Subcommittee on Cryptocurrency and Blockchain Technology.
Q & A Transcription
Question: In the Globe and Mail this morning the Auditors from Halifax have reported that QuadrigaCX which had assets missing in the range of $230 million, has recovered $28 million. So that strikes me then the investors in this currency are going to get a 1% return on their assets. Where’s the other 99%?
Answer: The question is about the Quadriga mess, I also read the article, I got it printed out here. So, the question was, the investors, that is the guys who decided to use this mechanism as an exchange. Which an exchange is, I happen to have Aeroplan Airmiles and I also have other bonus points from hotel systems. There are online things where I can exchange or value my Aeroplan airmiles with my hotel things, and I can mix and match and end up with something else. That’s not a whole bunch different than what these currency exchanges are doing. Except they’re all cloaking it in mystery because most of the monies are corrupt. And most of the guys who are buying these, as in this case, are deeply corrupted. The answer to this – word came out of an interview on CBC about two weeks ago. This guy that comes on Friday afternoons talks about finance, and they asked him about this and he said, this is a crucial thing, he said, “look I had money, I had some Bitcoin code cryptocurrency there, but I took it out and put them in my private wallet, which I didn’t have online because anything online is susceptible for being hacked.” So, here’s this financial guy saying, “so, if you use the exchange, you don’t put it in their wallet, you put it in your own wallet, and just to make sure, you take it offline because there’s no other way to protect it if it’s online”. People don’t steal cryptocurrencies. They steal the alpha numeric key for the ownership and access to the currency. So, you have to make sure that no one can get access to your wallet because it’s not that difficult given massive computing power to reverse engineer and figure out what the key is. And this guy who died, under some unknown circumstances, his partners it turns out now had long criminal records and who knows where they are and who knows where the money is. Perhaps in Moldova. I chose Moldova for a reason by the way.
Question: The actual items called Bitcoins which are being manufactured by people who use a lot of electricity. What is their function in the whole system?
Answer: It looks good. You know when you’re a miner or when you have to buy something, if you don’t want the electronic stuff, you may get this. Its value is determined by the market value of Bitcoins on that date, which is manipulated virtually every day by bigger players. Last year, the head of the German Central Bank, the Deutsche Bundesbank, quoted a figure, which he said was an accurate figure, that the cost of one credit transaction, that is the amount of energy used for one credit transaction, compared to the amount of energy used for one Bitcoin transaction. The Bitcoin transaction used, listen carefully, 460,000 more energy than the credit transaction. It is assumed that all of the Bitcoin transactions, all the cryptocurrency transactions, by next year, 2020, it’s here in one of these reports, will be greater than all of the output of Ireland in terms of energy. So, they go where energy is cheap, right now it’s Georgia, it was Iceland. And where people are corruptible, which is why they picked Georgia. I’ll be in Georgia this summer, Georgia’s right by Armenia for my son’s wedding. So, I’m kind of aware this.
Question: Who decides how many Bitcoins in circulation?
Answer: Who knows? Who knows? I mean I can tell you what they say, but for a society and a community that depends on trust, the main players are remarkably untrustworthy. I’m sorry. There are some rules and regulations, but it is possible to set up new Bitcoins, they’re called forks. There’s a hard fork and a soft fork. This is all that stuff that I don’t want to talk about. So, they just keep changing the rules. And because the chain transactions can keep going and going and going, you can just keep adding to it. Most of the computer guys are wondering, “well, so I did these two chain transactions, how do you get them together?” There’s a lot of computer time spent on that. None of which I want to talk about because it’s like my Dual Down-draft Weber Carburetor, it either works or it doesn’t.
Question: I’d like you to comment on IBM and their use of blockchain because there’s quite a bit of information on their website about blockchain application in their marketing.
Answer: So, the question is, IBM and their use of blockchain. Last numbers that I saw on this, IBM has put in $500 million, I think that was the number that they made public, to develop blockchain technology. There is an enormous market, perceived market, for use of blockchain technology. No one quite has figured it out. If someone says to you, “you need it for supply chain management,” before we had blockchain, we had little cows with little tags in their ear that had numbers on them, and everyone knew what had happened to that cow its whole life, I can’t see how blockchain can make that any easier. This is a pretty simple process, but there are people who are selling them, I got to be careful here, most of the big auditing companies, accounting companies have got platoons of people selling this stuff to their unwary customers, I shouldn’t say that word… to their customers who trust the accountants.
Question: With your knowledge of this topic we’re discussing, if you look forward three years, five years, ten years are you bullish or bearish as to whether blockchain is going to help society, or bring it down financially?
Answer: I will quote, if I can find this quote really fast. I wrote Julian a letter here last year and I’m going to quote from that letter, because I told him I would. So, in 2018, in the first few months of 2018, there were three remarkable speeches, one given by the head of the Bank of International Settlements in Geneva, the second given by the head of the German Central Bank, and the third given by the head of the Monetary Authority of Singapore, and this was called “Cryptotokens: The Good, the Bad, and the Ugly” and actually, it was, in some ways, the most cohesive of all three speeches. The last two paragraph reads as follows. “We must work together, regulators of the crypto-industry,” I’ll stop there. The bank’s want the regulators to solve the problem and the regulators are saying, “not us, someone else but not us”. Anyway, “to make sure that bad money does not take hold.” Well, I think that may be a little optimistic. And then he says, “and that a new generation of cryptotokensemerges that harnesses the potential of blockchain technology for social good while mitigating the risks today’s tokens pose. “Well, that’s a hope. I’m very happy to be hopeful. Am I optimistic? Well there are a lot of crooks, and even many of the players in this have such huge vested interests that they may not all agree to some of these end results. I have no idea. Would I be cautious as an investor? Well it depends on what I’m gambling on. Would I be cautious as someone reading financial statements? Oh, yeah. For sure. I don’t know if I’ve answered your question. I’m sorry that I can’t give the old crystal ball, you know elevator pitch. I don’t know.
Question: You talked about cash and assets and tokens and Canadian Tire Money and presumably cigarettes. All this stuff is a way of storing wealth. How do you spend cryptocurrency?
Answer: Ah, I’m so glad you asked that question! How do you spend this stuff? How do you get it? Well, I’m going to revert to one of my first statements. It works. The guys who are getting the cryptocurrency can use it. Okay? So, obviously it’s not that difficult to use. There are law firms in this country, there are accounting firms, I think even coffee chains, who are taking as currency Bitcoins. The law firms that are taking Bitcoins are the ones who have clients who are selling them so, they’ll be paid. There’s always a market. There is a continual market changing Bitcoins into moola, into cash. There is. When you get those reports, Bitcoins gone up to $10,000 or down to $3,000, they’re talking about dollars, but you’ve got a bag of Bitcoins, and it was worth $10,000 a while ago, which are $3,000 per unit now. Well you go sell them. There are guys who buy and sell Bitcoin publicly, because at that point the transaction is legal. How the money got into Bitcoin, not so. It’s very convenient to use for money movement and indirectly for money laundering, a topic that I’m trying to avoid in this right now because there’s so much misinformation about that, but meh, I’m not a politician.
Question: Internationally I know you can pay for a freight in cryptocurrency these days. I’m baffled as to the value of that freight that they are paying for and who determines it, but who holds the money?
Answer: Ah, well I did mention letters of credit, something that I spent a lot of my career playing around with because they’re really magic. The idea that some bank in Amsterdam writes a letter to some bank in England saying, “if some Captain shows up with these documents, give him some money.” That’s what it is. It really is no different than that. Who holds it? This is the problem of trust. If you believe in the blockchain, because I’ve seen a number of deals in the last little while, where the currency used was blockchain, it was Bitcoin, and they just were basically buying ahead. Like any, you know buying money for the future’s worth. A lot of people would rather use alternative currency for a lot of reasons. The Chinese government has really cracked down on it. South Korea and Japan still a very vibrant cryptocurrency market there for reasons that are unclear. The American dollar is still the accepted base. The Russians don’t want anything but American dollars, the Russians also, now I’m treading on really dangerous water, the Russians in particular want to control blockchain technology. They felt that the Americans grabbed a hold of the web and they don’t want to let that happen ever again. Meanwhile the Chinese are pushing ahead the same year that the Americans finally started to work on the Standards Document, which I showed you. The Chinese military announced that its number one IT goal for the whole military of China was setting proper standards for blockchain technology. Boy, there’s a lot of interest in this.
Question: Is there any progress in making blockchain less energy dependent in regard to the way it’s mined?
Answer: Probably not. I mean people are talking about it. They’re talking about using the power inherent in a smart contract, but now you’re just talking to computer guys talking about computer guys. These conversations are so esoteric, that is those inside that group, that those of us who are exoteric, outside that group, it’s just a pile of words. I don’t see right now, and I am really an autodidact. I’m self-taught of this. I don’t see any remarkable movement there. I know people are working on it, and know they’ve been working on it, I think at Carnegie Mellon and MIT, I think, are doing something on this, but I don’t see any real progress yet. But I’m not meaning economic progress. Because people use cheap energy. I mean, people are using, maybe not yours, but many people’s computers, while you’re in bed at night sleeping, if you left your computer on, they may well be a program using all of your excess power to mine cryptocurrencies. You don’t know because you’ve got more power than you need. It’s there, it’s free, they’re not paying for it. Imagine that over the hundreds of millions of people. I’m sorry have told you that story.
Question: This sounds to me like it’s all kind of a smokescreen diverting us from paying the attention that we need to to our bank accounts and that sort of thing. What about online banking? How safe is a person’s money in a bank account that’s accessible by online banking?
Answer: I just spent three years on a board where privacy and security were really an important issue. I know that the banks tell you how important this is for them. I also have a pretty good idea of how much they fork out every year. Things that they have to cover because things went walking. As long as the banks are prepared to keep forking it out, it’s going to happen. How safe is it? Well, it depends. If you figure that this $50 is yours alone, you may never get this $50 back. If you figure any $50 is okay for me, you’ll probably get it back with a Canadian banker. I mean that’s not much of the of a fine argument about the Canadian banking system, but our system here is comparably very secure. I don’t want to talk about Moldova again, I can talk about Estonia, Latvia, or even Denmark which just got played for hundreds and hundreds of millions of dollars. Nice, that I’ve got time to think about these things.