How can blockchain fit into the cannabis industry?

Unlike most industries, the recreational and medical cannabis markets, and to a lesser extent the hemp market, are subject to greater than average legislative and regulatory oversight.

While most cannabis enthusiasts roll their eyes at the idea of safety standards and product provenance requirements, it's an area of the industry that must exist, for public order and health concerns, and often be reinforced where it already exists.

Whether it's tracking consumption, creating a cheaper and more efficient regulatory authority, more transparency on cultivation methods, new payment methods or even creating better cannabis-centric social networks, blockchain technology has the potential to better serve everyone, from early experimenters to the most enlightened consumers.

What are the challenges facing the cannabis industry?

Since the legalization of recreational cannabis in many American states and Canadians, the transition from an illegal to a legal market is fraught with obstacles.

Depending on one's view of the industry, it's perhaps not surprising that some cannabis is still produced and sold in illegal channels, and there are a number of reasons why the growth of legal cannabis has not been as rapid as expected:

• Access restricted by too few stores
• Higher prices for legal products
• Smaller selection of products
• Supply shortages in stores and online
• Home delivery prohibited
• Lower quality of legal products

As the cannabis industry grows, some of these problems are resolved, whether by increasing the number of production licenses, by facilitating the transition of illegal growers to the legal market or by not restricting the diversity of existing cannabis products.

How can blockchain help?

As mentioned above, there is apprehension about legal cannabis, sometimes for good reason (lower quality, prohibition of edibles...). Marketing is also restricted for retailers and authorized producers, preventing the dissemination of relevant information on the consistency, safety and quality of legal cannabis.

Health concerns have been raised regarding the vaporization of cannabis concentrates, which has led to temporary bans on these products in places like Massachusetts in 2019. And with a multitude of producers and suppliers, but a highly variable market supply, it can be difficult for consumers to find the products they prefer.

Blockchain is a decentralized digital technology that keeps a record of all transactions that occur within a network. Records of these interactions are kept in a decentralized networked system. Each batch of transactions on a blockchain is called a block, and each block is sorted chronologically to form a chain. As there are thousands or millions of copies of the same chain, the software can quickly check previous ledger entries.

Blockchain has made a name for itself through its use as the engine of various crypto-currencies, but it can also be used for much more than that.

Transparency on product origin

Like all supply chains, the cannabis industries can benefit from the enhanced provenance systems that blockchain can provide if all participants adhere to it. This can offer suppliers and customers the peace of mind that comes from knowing how cannabis was grown, by whom, and that no nefarious elements were involved in any link of the supply chain, be it for B2B exchanges or for consumer information.

Consumption monitoring

The idea is not to have a tracker in the pocket that would send data back to the regulatory authority of its state/country. Rather, whether it's to meet the legal cannabis purchase quota set daily/monthly by states, or simply to track consumption, the introduction of blockchain technology to monitor individual sales may represent a happy medium between total liberalization and overly close monitoring.

We can also imagine using the blockchain to help understand cannabis use opioid abuse, for example, and derive personalized recommendations for patients.

Cannabis social networks

Businesses and individuals can use blockchain-based cannabis forums and specialist social networks to meet like-minded people, access special offers and connect with cannabis-related businesses, geographically close to them or further afield.

These companies are currently prohibited from advertising on most social networks, as they are still considered «illegal». By creating a space for a cannabis-friendly audience receptive to their message on a platform that escapes the strict prohibitions of social media, users and companies can feel free to interact safely, without fear that simple searches will reveal their identity. This kind of anonymity is one of the many advantages of blockchain technology.

Facilitating tax escalation

As we saw recently in California, The right taxation, indexed to the right place in the supply chain, can make the difference between a flourishing market and a more complicated one.

By integrating blockchain technology with stores, taxation could become more accurate, audits simpler for all parties, and revenues returned in greater quantities to the citizens of states that have legalized cannabis.

Banking / payment services for the cannabis industry

Cannabis is still illegal at the federal level in the United States. companies are barred from banking services and operate mainly on a cash basis. Even in Canada, where cannabis is legal, access to banks for cannabis businesses is still complicated.

To remedy this, several crypto - BitCanna (BCNA), HempCoin (THC), DopeCoin (DOPE), CannaCoin (CNN) - have presented themselves as a viable alternative for cannabis entrepreneurs. These corners can generally be used to pay for goods and services, exchanged on certain exchanges and redeemed in conventional currency if necessary.

Their value increases as participants purchase, and is also indirectly linked to the success of the industry. Until traditional banks become more accepting of cannabis revenues, this type of technology may appeal to entrepreneurs who don't see the space under their mattress as a viable alternative.