Blockchain Buds: Tracking Cannabis From Seed To Sale
Cryptocurrency and cannabis are two of the most exciting emerging industries in modern times. Both are constant topics of discussion in media and politics on national, state, and local levels. We covered several aspects of the cannabis industry and crypto's green rush, but most of it is honestly little more than kitsch value.
Hempcoin is one of the only viable cannabis crypto projects that passed across our radar so far. Many, like Alt Thirty Six, are focused on crypto payments in cannabis. Because it's a mostly cash-only industry (many dispensaries and delivery services around the country have figured out ways to accept card payments), cannabis seems ripe for disruption from cryptocurrency.
The blockchain is where the true value lies in cannabis, though. Supply chains are desperate for blockchain technology, and it's no more apparent than in the legal medical and recreational cannabis industry. Seed-to-sale tracking is mandatory, and each state has different requirements and a different system of record.
Crypto payments are as uninteresting to pot dispensaries as they are to gas stations, grocery stores, and realtors for the most part. But the cannabis supply chain can easily be disrupted by the right blockchain if they play their cards right.
Here's how.
Why Crypto Isn't High on Pot's Mind
The selling point for a crypto coin like Potcoin is that cannabis-based businesses can't use banking services. This is somewhat true: FDIC-insured institutions can't do business with cannabusinesses until it's federal, rescheduled and decriminalized.
Still, the Department of the Treasury left things open-ended for banks to open accounts, and cannabis-based businesses have long found ways to deal with cash overflow problems. Financing and payments simply aren't appealing to retailers at the moment – cannabis retailers are no different.
These businesses are highly scrutinized by federal, state, and local authorities and regulators, and the last thing they need to do is gamble with their money. Besides, only well-funded projects are able to start up these days.
In California's recently legalized recreational market, it costs around $500,000 just for licensing fees and startup costs. These become annual fees, and that's not even including taxes and typical overhead and business expenses. It's a massive hurdle that serves as a financial gatekeeper to all but firms with liquidity to gamble.
And it is a gamble – California raked in over $2.75 billion in cannabis sales to date, but businesses risk being shut down or raided after Jeff Sessions ordered the Department of Justice to ignore Obama-era guidelines – which had essentially ceased Federal harassment of the marijuana industry, except in cases of interstate commerce, organized crime, and sale to minors.
Doing business with the crypto industry, which is heavily scrutinized by regulators itself, seems like adding fuel to the fire. High Times even canceled an effort to use Bitcoin in its IPO: one can only speculate on how new voicers like Marijuana Business Daily, Dope, and Cannabis Now will view the High Times decision to avoid the crypto route.
The Cannabis Supply Blockchain Saves the Day
The real pain point that blockchain can resolve for the cannabis industry is in the seed-to-sale tracking. What's currently happening in each state that legalizes medical and recreational cannabis is one inventory tracking system becomes the state's official system of record. In many states like California, Nevada, Alaska, Oregon, and Colorado, MetRC by Franwell the preferred SoR.
California faces massive delays until at least November in its full tracking system because implementing MetRC is harder than it sounds. Every single product must be tagged as seeds, plants, harvested, extracted, etc. Even the patient is tracked.
If you've never seen a legal cannabis label, here's one from Arizona's medical marijuana program. It's for a Thai stick.
Everything is scanned and traced so the state can see the full journey of every product from being planted to bought by the end-user. In DIY states like Oregon, seeing the full farm-to-table life cycle of every ingredient in everything is coveted. If you don't do it right, they'll just grow and make their own.
In Nevada, testing is among the best in the country. This means every batch from every grower, producer, and dispensary has to be tested for heavy metals, pesticides, mold, and other contaminates, along with potency levels. Labeling and testing requirements get strict, and transferring data from the dispensary's in-house point-of-sale system to the state's SoR has a lot of moving parts.
This is where the blockchain could easily fix the cannabis industry. By attaching the codes and labels already being traced, the information is easier to store, archive, and search. Compliance and data transfers between licensed businesses and government agencies would be greatly improved.
But, as with everything government, there's a caveat.
The One Problem in the Way of Marijuana Blockchain Adoption
Aside from the fact that nobody except Hempcoin is really focused on using the blockchain for the cannabis supply chain, the other problem is each state has contracts in place with a particular service provider.
To accomplish this feat of helping the cannabis industry, you would need to have a finger on the pulse of when federal legislators are willing to decriminalize it. At this point, you could pitch the blockchain on the federal level against all the companies like Franwell making legacy-based systems.
Instead of publicity stunts like sending Dennis Rodman to North Korea or throwing a tacky pot leaf on a crypto, that's where the real money is to be made in the cannabis industry.
Every cannabis entrepreneur is up to their ears in pitches from businesses trying to take a piece of their pie. You won't win them over unless you can legitimately resolve their problems…even if you have to go over their heads to do it.
The author is not currently invested in any cryptocurrency mentioned here. He has, however, contributed to High Times magazine and does carry a medical marijuana card in the state of Arizona.
New Partnership Brings Blockchain To Cannabis Industry
Blockchains have strong potential for both growing and established industries, such as supply chains. Now, Mile High Labs, and Chain.io have collaborated to bring blockchain to supply chains in the marijuana industry.
Supply chain transparency provides yet another example of blockchain applications in the cannabis industry alongside financial services, which are currently difficult to come by for cannabis enterprises. According to a joint (no pun intended) press release, the budding cannabis industry leaves many consumers for want of information on how their products were grown, transported and handled.
In the release, Jason Roth, CEO of Mile High Labs, said:
"Mile High Labs is providing concrete, factual answers to some of the most prevalent questions that CBD consumers have: 'Where does my CBD come from? What's in it?' In an ever-evolving regulatory landscape, our advanced supply chain protects the integrity of our brand and products."
Chain.io's collaboration with Mile High Labs aims to rectify that by applying blockchains to create a secure, data and proof-driven product supply chain for the cannabis industry. This transparency, Mile High Labs believes, is the key to increasing demand for pot products on the consumer's end while putting blockchain technology to good use.
Regulatory compliance is another way in which DLT can shine, automating product I.D. checks. Roth added:
"The rising popularity of CBD has been seen by some as an opportunity to capitalize on a lack of knowledge and regulations. As a result, our industry is at risk of bad actors. These major developments in the Mile High Labs Supply Chain represent our steadfast commitment not only to safety and transparency but to the technological and regulatory advancement of the entire industry."
Blockchain and other emerging markets like the cannabis industry seem to offer each other opportunities that allow both to grow side by side. Whereas DLT's offer marijuana businesses decentralized and intelligent financial services and supply chains, the cannabis industry gives blockchain another chance to prove its transformative power in many industries.
Alt Thirty Six Raises $10 M For Dash- Powered Cannabis Industry
Digital payments and compliance platform Alt Thirty Six is dedicated to banking the rapidly growing $10 billion legal cannabis industry, and replacing their cash with cryptocurrency. According to a recent press release, the startup, which plans to leverage Dash to help the largely-unbanked Cannabis industry, has just secured $10 million in a Series A investment round.
Alt Thirty Six plans to use DASH to facilitate transfers and transactions at legal cannabis dispensaries, as Crypto Briefing has previously reported. Dash has already hitched its token's horse to VegaWallet, another crypto finance startup aiming to capture the underbanked but lucrative cannabis industry.
In both cases, successful implementation of the cryptocurrency could bring in widespread consumer adoption as pot businesses switch to Dash for secure transactions. Regular compliance is also a focus for Alt Thirty Six, as the company feels a fully aboveboard payments network will help drive customer acquisition.
"We are committed to revolutionizing the cannabis space by increasing access to compliant digital payments, making transactions easier and faster for all cannabis businesses," said Ken Ramirez, co-founder and CEO of Alt Thirty Six, in a statement. "This new Series A funding round provides us access to the resources we need to help facilitate our vision for one of the fastest growing industries in the country".
Dash's privacy, speed, and cost effectiveness potentially make it the ideal candidate to facilitate and support payments in the legal cannabis industry, which is booming despite the reluctance of major banks to serve "Cannabusinesses." Companies like Alt Thirty Six and VegaWallet show that cryptocurrencies can fulfill the role of a supporting payment network in virtually any emerging consumer market.
Dash In Lockstep With VegaWallet To Revamp Legal Cannabis Liquidity
Today, Dash, a leader in cryptocurrency payments and e-commerce, announced a partnership with VegaWallet to implement new applications and utility for Dash's blockchain-based payment protocols.
VegaWallet is now officially the first wallet to integrate BitGo's multi-signature Dash feature with InstaSend transactions. Vegawallet also plans to implement features for Dash's upcoming Evolution hard fork.
A marriage between Dash and VegaWallet technologies means the beginnings of new infrastructure for a largely untapped emerging market: the legal cannabis industry. Bradley Zastrow, Global Head of Business Development at Dash Core Group announced:
"VegaWallet's goal of creating a payments solution for the legal cannabis industry aligns with Dash's goals to support underbanked businesses, making them a key partner for us going forward."
Dash and VegaWallet providing on and off-ramps for legal cannabis enterprises spells multi billion dollar liquidity both ways. Dash gains privileged access to a market valued at $10 billion last year, and the legal pot industry acquires a new technology for capital storage and day to day value transfer, in a climate where legal cannabis based businesses struggle to find banking partners.VegaWallet presently supports multiple features for the Dash ecosystem, with plans to include further elements such as:
- An inventory management system
- Employee information panel
- Business metrics
- And a cryptocurrency rewards and loyalty program powered by Dash and VegaWallet token
In the press release, Tarek Hajri, CEO of VegaWallet said:
"VegaWallet's partnership with Dash provides a unique atmosphere for improvement concerning real world applications in the blockchain based payments space. We believe customers will be excited for these future applications regarding the shared interests on our roadmap."
Cannabis is clearly a growth industry, and when these two industries collaborate it will undoubtedly benefit the cause of mass adoption.
The author is invested in digital assets, but none mentioned in this article.
The Growing Use Cases of Blockchain in Cannabis
Cannabis is growing the U.S. and Canadian economies as the push for decriminalization moves forward.
In fact, as American industries go, its 250,000+ employees far surpassed the 52,300 coal miners in the USA in 2018. That number is expected to grow to 330,000 by 2022, and cannabis lobbyist group the Marijuana Policy Project reports nearly every state has some sort of pro-marijuana legislation at some stage of approval moving toward the 2020 election.
TruTrace CEO Robert Galarza took some time out from Consensus and Blockchain Week to discuss how his company's StrainSecure platform is leveraging blockchain to resolve the most pressing issues facing the modern cannabis industry.
The company currently operates in California and Canada, two of the most advanced cannabis cultures in the world. California contains Humboldt County, home to the Emerald Triangle, which is known worldwide as the Aalsmeer Flower Auction of pot. Canada joins Uruguay as the only two sovereign states in the world where cannabis is recreationally legal.
Both governments are struggling through growing pains with this emerging industry, and blockchain may hold the answer.
CA and CA: A Tale of Two Velocities
Legalizing weed isn't as easy as it sounds. California is ahead of the game in many ways, but it's still struggling with issues regarding its METRC seed-to-sale tracking system. And while legal within the state, it's still federally illegal, so there are a lot of gray areas cannabis companies have to navigate.
This leaves businesses in a precarious position – they have to record, track, and report all data on each plant's life cycle, but the tools to do so don't always work correctly. In fact, it took several years after the 2017 legalization before METRC's implementation, and it's still not fully functioning today.
Many credit software and database issues surrounding licensing and inventory tracking as driving prices up. This, in turn, crippled California's legal market, which fell far short of expectations so far.
And while Canada legalized before the U.S., launch difficulties strangled the supply of legal cannabis on its legal market. Red tape and bureaucracy still exists in the most progressive nations.
Relieving Headaches with Blockchain
With the lack of regulation comes lack of quality and safety. Up to 80 percent of the cannabis sold in California comes from the black market, and this creates a problem for medical patients who need dependable medication with predictable effects.
StrainSecure focuses on data integrity and efficiency, much like Factom's smart-contract protocol. The team believes in the power of blockchain to go beyond seed-to-sale to trace from genome-to-user. Like most modern blockchain 3.0 projects, interoperability and cross-compatibility is the aim.
Being able to trace the full supply chain of cannabis means both retailers and end-users can be assured that the product they're buying is exactly what it says it is. The strain genetics are stored in a smart contract, and data is added during each processing stage. It's even more thorough than the farm-to-table model we use for our food.
If molds, pesticides, and other carcinogens are found, they can be pinpointed and recalled effectively. StrainSecure is the blockchain solution helping cannabis-centric platforms like MJ Freeway, BioTrack, and AltThirtySix communicate with legacy platforms from SAP, Oracle, and others.
This interoperability is key to the success of the platform, as companies are using it to track and report data from in-store platforms to state regulators. It even helps dispensaries perform better due diligence on product being supplied by growers and distributors.
While many cannabis tech projects (crypto or not) focus on all the money in the sector, StrainSecure is fixing operational issues in the supply chain. It's a targeted move that will create a massive buzz if it's a big enough hit.
But it's not alone in this race – DMG Blockchain Solutions has a solution on the market, as does Parsl. Chain.io is working with Mile High Labs on another cannabis supply-chain blockchain. The space is highly competitive, and both cannabis and blockchain are too new to tell what's working yet.
Nobody ever said revolution was easy.
