We are nearing a place in time where cannabis will likely be legal across all of North America soon. Recreational cannabis is legal in 10 states, and medical cannabis is legal in 33 states in the U.S.
Cannabis has come a long way in a short amount of time and is likely here to stay. More than 40 countries around the world have legalized cannabis in some capacity, even the strictest of places, such as Thailand and South Korea have legalized cannabis for medical use. Recreational cannabis has been legalized in two countries; Canada and Uruguay. It is predicted that by 2022, Canada will be generating as much as $6B in cannabis sales.
An important point to note is that the legalization of cannabis is occurring through the legislative process. 2/3 Americans now favor legalization and Republicans and Senior Citizens, the two groups most opposed to legalization of cannabis have changed their viewpoints. The FDA has approved a cannabis derived drug. In June of 2018, GW Pharmaceuticals produced Epidiolex, a CBD based medicine to reduce and prevent seizures in children with epilepsy. It is currently the only FDA approved treatment for Dravet syndrome.
Cannabis has even made it to Wall Street. More influential cannabis companies have moved to the NYSE. Check out the following:
Canopy Growth: (NYSE:CGC), and Aurora Cannabis: (NYSE:ACB.
Cannabis stocks are going the IPO route on major U.S. Exchanges and Canadian cannabis stocks are gaining access to traditional banking services. Due to the legalization across the country in Canada, banks now have the ability to offer basic banking services to cannabis companies.
Cannabis sales are increasing more and more, but there is a lot more to do for the industry to realize its full potential.
Why blockchain for cannabis
There are a number of potential use cases for blockchain across the cannabis industry. Blockchain use cases can be classified as potential solutions to current problems within an organization or industry. A use case is essentially a valid reason for utilizing blockchain technology.
While the cannabis industry continues to expand and evolve, it is not without challenges.
Recreational and medical cannabis products are facing more product scrutiny than the average product that goes to market, and while cannabis users aren’t questioning the safety of it, federal, and state and local legislations and the FDA have to be able to prove safety for cannabis to compete as a mainstream product in the marketplace. From provenance to tracking consumption, payments, growing methods, consumption results, blockchain has the potential to transform and serve the cannabis industry.
Product provenance and illegal manufacturing
Although cannabis is becoming legal globally, the black market still remains, and so does the issue of cannabis provenance. In mentioning provenance we are referring to where the cannabis is being sourced from. Where was it grown? What is in each strand? How was it transported to the dispensary? Where was it stored, what temperature? The list can get very long depending on what requirements need to be met. This also applied to cannabis consumption products such as vape pens. Consumers will want some sort of assurance that these products were manufactured and assembled appropriately.
Product provenance is not a new concept or new to blockchain. The majority of blockchain use cases involve supply chain and product integrity. Simply, it is just a track and trace mechanism of a good.
They key to product provenance is being able to trace from source to customer. If cannabis farmers, suppliers, distributors, dispensaries, etc. are willing to participate in a blockchain ecosystem, then this can be achieved.
They key to any blockchain ecosystem is participation across the relevant and necessary parties. The solution has to benefit all parties and provide some incentive for participating. Due to the fact that the cannabis industry is so new, there is not much technology or infrastructure in place, so everybody involved has the potential to benefit.
Blockchains inherently provide an immutable, distributed, database for participants to interact on. Each participant can input the information necessary to create an immutable chain of transactions that will make up the product provenance for cannabis. This will give consumers and regulators the peace of mind they are seeking when it comes to the integrity of the cannabis being consumed and sold in the market.
Tracking use and consumption
While cannabis is legal in many states and countries there are still regulations regarding purchase, use, and sale. These laws are very difficult to enforce. Many stores admit that they are not tracking sales in anyway. Aside from rules and regulations, it is important to track usage and consumption amongst cannabis users. Many users may walk in to a dispensary citing anxiety, trouble sleeping, stress, difficultly eating, etc. and a strand or type of cannabis may be suggested to them. As cannabis becomes more mainstream it would be helpful to know which strands are solving which problems, as well as the amount being consumed. Cannabis buyers can participate in the blockchain ecosystem as well with mobile friendly apps to track their purchases and consumption.
Enabling taxation at the state and local level
Regardless of, well, everything, there is going to be tax when purchasing cannabis legally. States have been generating billions of revenue for quite some time now, but how much exactly? Should they change? Where is the revenue going?
Enabling a blockchain based ecosystem would solidify the sales and revenue numbers and create an immutable trail of sales and tax at the state level. This would be essential for audit purposes as well as determining sales tax. Revenues could also be passed back appropriately.
Banking, payments, and digital currency
By far the hottest topic when it comes to cannabis is the banking and payments that surround it. Those making money in the cannabis industry cannot just walk into Bank of America or any other commercial bank and open a business account. Proving where the funds originated from would never happen and federal and state laws have yet to find a middle ground. Current state has dispensary owners, farmers, and suppliers keeping large amounts of cash on hand and stored in their homes, safes, and where ever else they can render appropriate.
As of late there have been several cannabis digital currencies that have come to market. The currency can be exchanged on various exchanges and platforms and can be liquified if needed. These exchanges and platforms are enabled by blockchain technology and allow all the participants in the ecosystem to facilitate payments to each other. Cannabis consumers can make payments via the digital currencies and as more users participate the value of the coins increase. Although, digital currencies come with their own sets of challenges, it is a viable alternative to keeping cash around until banks become more accepting of the cannabis revenues.
Data transparency and analytics
As of today, where can data on cannabis products, the industry, farmers, suppliers, etc., be found? Due to the differences between federal and state and local laws, some still view cannabis as illegal, leading to minimal information and statistics throughout the industry. Many businesses and companies are still prohibited to interact with the cannabis industry entirely. Lawyers, consultants, etc., would never be able to do a project with a cannabis company, as law would prohibit it. How can we share data and get access to the information we need?
A blockchain enabled ecosystem would provide participants with valuable insights into the cannabis industry. From provenance, to consumption, to tracking, etc., this information would be readily available. Additionally, many blockchain based ecosystems provide detailed and personalized analytics into the participants. This gives insights into what each user is doing as well as what else is occurring the ecosystem.
Whether it is product provenance, traceability, consumption, or record to report transactions a distributed database would transform the cannabis industry by providing transparency and integrity across an ecosystem.