CANNABIS Goes BLOCKCHAIN

Written by Maurice Cardinal

Medical marijuana, as of early 2019, is legal in thirty-three American states including Washington DC, and is also legal for RECREATIONAL use in a dozen of these medical state locations. In Canada, medical and recreational use is legal at a federal level across the entire country, which means that overall in North America there are;

• • • Federal sets of governances

    • Provincial and state regulations

    • Separate legislation for municipalities 

      It’s an extremely complex and Byzantine network that creates an administrative and operational nightmare for growers, suppliers, distributors, retailers, and even consumers.

Everyone has a different set of rules, and CANNABIS rules change rapidly.

Blockchain is an ideal tool to manage one of the most complex supply chains in the world – thankfully too because the marijuana network is not getting any easier to administrate.

Recreational and medical cannabis faces more stringent legislative and regulatory oversight than most industries, similar in many regards to alcohol, tobacco, firearms, and explosives at the ATF.

Compared to traditional supply chain strategies, blockchain more easily manages all levels of governance, from tracking consumption, to developing more affordable and effective regulatory networks. It defines and records accurate provenance for B2B and B2C clients and customers concerned with cultivation and production methods.

Blockchain is ideal for identifying provenance and for preventing the illegal manufacture and distribution of medical marijuana–especially related to recreational weed.

Almost 160 million people globally use cannabis. Domestic legal pot production has increased tenfold in the last twenty-five years, but the black market is still incredibly enormous with numbers approaching $150 billion. This alone makes blockchain an excellent choice to manage marijuana legally, and will substantially reduce costs and improve regulatory effectiveness.

A large portion of the global marijuana supply is not yet accurately tracked from grower to distributor, let alone from seed-to-sale, which means most consumers have no idea what they are putting in their bodies regarding pesticides or dangerous chemicals used during product processing.

Just like the wine industry, the provenance of marijuana will grow to become an increasingly valued and important component of the supply chain process.

Blockchain cannabis is not a fad, it is a trend.

A number of cannabis companies already utilize blockchain, like BLOCKStrain, Greenstream, and Budbo with many more coming online every day. Blockchain development companies like DMG are rapidly rolling out solutions across the entire cycle.

Blockchain makes it easier and more affordable to manage the amount of product a consumer can purchase regardless of the territory or jurisdiction. Blockchain easily reaches across all borders, whether state, provincial or country, and it can be fully transparent, or selectively permission-based depending on the user.

Trading regulatory information is beneficial for growers, distributors, shippers, retailers and consumers, and is critically important at this nascent stage of the industry to be able to identify and separate legal from black market. Without clear and affordable solutions, the black market will continuously grow and have a negative impact on legal suppliers and users. If oversight is too heavy-handed and onerous, or expensive for the consumer, many will easily grow their own and sell to friends. Growing at home in a closet is much easier today with LED lights and organic hydroponics. Some systems are plug-and-play, which means you just flip a switch and watch it grow.

Highly respected companies like IBM, plus BlockMedX and others in the pharmaceutical industry are developing blockchain cannabis solutions to alleviate all these issues and more.

Transparency is at the top of their list.

Cannabis-centric Social Networks are also taking off in every region, which makes it easy for consumers to see who is doing it correctly, and who is still operating like an Old School Drug Lord.

Weed Forums also abound and cover pot topics in real time. Forums like Grasscity, Duby, Massroots and many others offer information and insight, but they can also inadvertently reveal names of users, which could cause serious implications for many people. Most consumers still do not want their employers to know they smoke pot. Consequently, the better the security, the more confidence consumers will have in the system.

Over two thousand dispensaries in the United States collected $10 million+ in revenue in the last year alone. Just like alcohol and tobacco, advertising cannabis is incredibly restrictive. It is an extremely difficult challenge to find legal and unique opportunities to bridge the gap between supplier and user .

In 2019, competition among marijuana growers and distributors is still relatively low, but the list of new players is growing exponentially. When it gets to critical mass and a saturation point, which is happening very quickly, the need to manage cost-effective advertising and promotion will be the key to success just like it is for businesses like wine or craft beer. Once the market is saturated it’s challenging to stand out to gain market share.

Advertising for all types of companies is expensive, and when it comes to a government controlled substance like marijuana it is also incredibly restrictive. You can’t advertise in your local paper or website, which is the metaphorical “last mile” to the consumer where buyers make their purchase decision.

Companies like International Artist Day provide platforms for alcohol companies like Van Gogh Vodka to create partnerships that allow alcohol manufacturers to indirectly reach and expose their products to consumers. Intermediaries create events and competitions that attract users at a consumer level, and provide an avenue for social media channels to share information unencumbered by government regulations. Blockchain makes affiliations like this much easier and safer to manage.

Established mainstream fine art painters like Doriz provide a gallery-level connection that reaches deep into the consumer base. Advertising agencies create campaigns that get everyone involved and talking, while blockchain provides a seamless symbiosis.

Government regulations are so complex they intimidate most social media networks because they can’t keep up. Marijuana retailers need a trusted database and library of information that is fast and easy to access, and most importantly that can be managed in real time through a cryptoblock SMART CONTRACT. AI-artificial intelligence, which is a component of blockchain, makes it all possible and at an affordable rate.

Suppliers and consumers can use blockchain-cannabis forums to meet each other and learn about special promotions. Some marketers, especially those that grew up in the black and gray market era, mistakenly think that once the market matures, advertising will magically become more easily available. It won’t though, because it’s still a controlled substance in many jurisdictions and operates under regulations similar to alcohol and tobacco. In Canada it is now regulated under the Cannabis Act, but it still has essentially the same restrictions regarding advertising and promotion.

Marijuana advertising is a challenge because just like the old blues song goes, “Everybody wants to go to heaven, but nobody wants to die” – in other words, we want open access to products, events, and campaigns, but suppliers also want to I.D. buyers. Most buyers though want to remain anonymous. Blockchain provides a seamless solution because it can be managed at a granular level in a way similar to how micro-payments work.

With blockchain you can have your cannabis cookie and eat it too!

Companies like Smoke are working to develop standardized strategies and solutions to this complex issue.

Marijuana taxation is also a complex challenge.

Alcohol and tobacco are top-heavy with taxes, and weed is no different. It’s a cash cow that already provides governments with billions in revenue. For example, Massachusetts purchasers pay 10.75% sales tax, Nevada consumers are levied a 15% excise tax in addition to a 10% sales tax, while Coloradans are subject to five tax hits of 15% excise tax, 8% retail tax on recreational sales, 2.9% state sales tax, local sales tax of 4.9%, and local excise taxes, which in Denver is 3.5%. It all adds up to California reaping over $2.7 billion, Colorado over $1.1 billion, and Washington state almost one billion in tax revenue for marijuana sales.

Because blockchain is immutable (impossible to hack or change without permission) it would permanently eradicate tax issues for dispensaries by delivering accurate results to the micro-penny for every transaction large or small. Governments would more cost-effectively collect payments automatically, and over the long term citizens would benefit. Companies like IBM are way ahead of the curve and have been developing blockchain solutions for this type of system for the last few years.

Blockchain Banking is also a Bonus for the Cannabis Business!

Cryptocurrencies and blockchain also alleviate the challenges marijuana suppliers have dealing with banks and lending institutions. Financial institutions, like the Bank of America and Chase for example, still foolishly refuse to deal with the marijuana industry. Legitimate marijuana suppliers deal with very large quantities of cash and consequently look for innovative solutions, which opens the door to criminal activities that could be avoided if a blockchain solution were in place.

To alleviate banking challenges, cannabis crypto coins are popping up more readily. These specialty crypto coins allow operators to move funds from their operations more safely and easily. It won’t take long before they set benchmarks and become the standard for operation, which would cut the federal reserve out of the equation entirely until an exchange converted the crypto coins to fiat (real money), if ever. In any industry, liquidity is critically important, and being able to easily move funds will became a priority. It will also help marijuana operators easily and seamlessly invest their revenues in alternative weed hedge funds that offer greater stability. A number of coins are already in the system like PotCoin (POT), CannabisCoin (CANN), DopeCoin (DOPE), HempCoin (THC), and CannaCoin (CCN) with more showing up regularly. The coins that prove to be stable will appeal to consumers who will gravitate to them as “loyalty” anchors.

In addition to crypto pot coins, other companies are also developing services, like Paragon, that provides office space for legal cannabis companies that have a hard time finding commercial space to run their operations, or WebJoint, a company that develops software solutions to manage data more cost effectively.

Currently, because of the relatively fast transition to legality, many official government offices have still not developed operational manuals for internal use, let alone designed systems that allow marijuana companies to easily integrate with regulators. Blockchain can smooth over this process by providing immutable networks that everyone trusts. The three levels of government also still argue with each other over protocols, which makes it literally impossible in some cases for operators to know which rules to follow. The chaos that this fractured network wallows in is overwhelming and places operators in precarious legal and financial positions. It’s so complicated it has even placed pressure on lawyers who also can’t figure out the rules and could end up doing something that gets them disbarred for misconduct. Old school systems make everyone nervous.

Blockchain, cryptocurrencies, smart contracts, and AI however, all work together to make the transition smoother for everyone, from the grower to the consumer and everyone in between including governments.

The sooner blockchain is integrated into the cannabis growing, processing, marketing and retail network, the better it is for everyone.

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