Utilizing Blockchain Technology in the Cannabis Industry
Blockchain technology could help in the movement to legalize cannabis.
Few industries are as misunderstood, or as complimentary, as cannabis and blockchain. Both niches are young and exist in highly speculative markets with foggy regulatory conditions, but have also received an influx of highly talented entrepreneurs and programmers looking to solve some of their respective industry’s largest problems.
In order to truly understand the synergy of cannabis and blockchain, we must look beyond the hype and speculation and understand how and why the cannabis industry needs blockchain technology, and how both industries may inevitably depend on each other.
Cannabis and Blockchain at a Glimpse
The North American cannabis industry has seen a major spike in growth and attention from entrepreneurs seeking to create value and strike it big, investors looking for a piece of the pie, activists fighting for what they believe to be a truly beneficial product, and politicians on both sides of the heated legalization debate.
The major strides in the cannabis industry were not without their pain points. Transparency, payment solutions, quality assurance and maintenance, and general regulatory uncertainty have plagued cannabis entrepreneurs for years.
The blockchain is essentially an immutable distributed database that is at the heart of what many people are calling a cryptocurrency revolution. Everything from popular cryptocurrencies such as Bitcoin and Ethereum to publicly traded companies such as IBM have utilized blockchain to solve countless issues for thousands of businesses.
Combined with sister technologies like cryptocurrency (digital cryptographic currency) and smart contracts (programming-based contracts), blockchain can help the cannabis industry solve its current issues and navigate the uncertain path ahead.
Setting a Standard of Transparency
In an interview with Rolling Stone, Jessica VerSteeg, the CEO of a cannabis startup called Paragon that utilizing its own blockchain-based cryptocurrency, noted that “Blockchain is about [transparency]. And that’s what we need in the cannabis space.”
Since the blockchain ledger is unchanging, it significantly reduces or eliminates any potential human-based obfuscation or deceptive practices. This would make it extremely easy for financial institutions and governments to audit cannabis companies and keep track of taxes owed.
This is particularly important in the cannabis space where businesses must face fragmented regulations across borders. Blockchain would empower these businesses with tangible proof of the point of origin and whether any products moved across national or state lines potentially incurring more taxes or violating federal law. This is one of the reasons VerSteeg and other entrepreneurs cite blockchain as being “one catalyst that could help legalize cannabis.”
Although Paragon would later become embroiled in a lawsuit due to its failure to register its Initial Coin Offering (ICO) with the SEC, their fundamental business plan to add transparency to the cannabis space hasn’t changed.
Quality Assurance and Maintenance
Blockchain enables businesses to manage their supply chains in real-time, eliminating paper trails and their inescapable lag. Since the cannabis space is relatively new, few companies have been able to create an effective vertical integration in their supply chain free from any lag or loss of product.
It’s likely that cannabis will touch many different businesses from when it is farmed to when it gets to an authorized dispensary, creating multiple potential costly points of failure. Cannabis businesses utilizing blockchain will be able to precisely pinpoint any inefficiencies in the process and, well, nip them in the bud.
Additionally, by utilizing blockchain in their supply-chain, cannabis businesses will be able to provide customers with the complete picture of their purchase’s journey from when it was just a seed and how many different parties it touched before ending up in their shopping cart.
Dispensaries will also be able to fully guarantee their products contain exactly the amount of THC, CBD and whether it is sativa or indica dominant as what they’re advertised. Many first-timers walking through legal dispensary doors tend to be concerned about their sensitivities to the products, and a supply chain supported by flawless math caters to a better overall customer experience.