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The Race to Put Cannabis on the Blockchain

Source: iStock/Juanmonino

Blockchains and the marijuana industry have much in common. Both are often maligned and misunderstood; both are in early stages of development, where new players are throwing everything at the wall in the hope that something will stick.

It may therefore come as little surprise that a handful of companies have been formed recently with the aim of uniting them. And while it's too early to tell just how much genuine value the blockchain can bring to the marijuana business by tracking cannabis supply chains, it has the potential to unify the fragmented cannabis industry in America and beyond, and to provide it with a legitimacy and security it previously lacked.

The emergence of blockchain technology has come at just the right time in history for the industry. California, Colorado, Washington, Alaska, Oregon, Massachusetts, Nevada, and Vermont have all legalised the recreational use of cannabis in recent months and years, and other American states are likely to follow. Meanwhile, nations beyond the US are expected to do much the same in the coming year, with New Zealand and Canada outlining plans to legalise recreational pot, a year after Uruguay became the first nation in the world to make such plans a reality.

As such, there's considerable scope for new participants to enter the burgeoning international cannabis market, which is gradually solidifying away from its clandestine, inchoate beginnings. This is precisely where a company such as 420 Blockchain enters the picture. Launched last year in the US, it offers businesses and state governments use of a hyperledger that tracks the production and distribution of cannabis, from growers to customers.

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On the one hand, 420 Blockchain provides cannabis products with a unique ID that's placed on the blockchain. On the other, it also provides smart contracts, which specify the quality of the products being delivered to vendors and the legal conditions vendors must uphold when selling the products in different states.

By producing smart contracts tailored to specific states within the US, 420 Blockchain's ledger offers the developing cannabis industry a way of working around the fact that marijuana laws are different in different states (and that there's no single federal law tying these all together).

As the company's CEO, Mike Kramer, said to InsideSources, "Cannabis is so fragmented; it is a fragmented industry."

Safer and more legitimate industry

The blockchain furnishes a response to such fragmentation, since the infrastructure it provides to cannabis growers, distributors and sellers acts as single, unified backbone that transcends state boundaries. However, attempting to go one better than this is Budbo, a Californian startup that's building a "global blockchain-based immutable ledger." Scheduled for release in May 2018, this international ledger – dubbed Budbo 2.0 and based on the Ethereum blockchain – aims to give retailers, growers, manufacturers and customers immutable records that cover the entire "life cycle of a product."

Once again, one of the chief benefits of this will be that it endows the scattered cannabis industry with a single, unified framework. Yet Budbo's founder and president, Luke Patterson, also highlights its potential in making the industry safer, more legitimate, and more trustworthy.

"The smart contract enables the safe transfer of goods through verifiable proof of pick up, bill of lading, and proof of delivery," he says. "Medical testing of cannabis potency is verified and immutable as the product is moved from lab to dispensary."

Given that there are undoubtedly some people and groups within the US and beyond who are still wary of the safety of cannabis (e.g. US Attorney General Jeff Sessions), the use of the blockchain to create a trustless record of product quality and regulatory compliance is vital, especially if the marijuana industry is to be allowed to expand.

Much the same also applies in Canada, where CanaPass are planning to apply its blockchain-based "cannabis management system" to the recreational marijuana market. "Our CanaPass Blockchain system is already Canada's most advanced medical cannabis regulatory solution, " explains Dr. Michael Murphy, CEO of CanaPass parent company Alternate Health. "And we expect our recreational adaption to be an industry-changing technology as the Canadian government prepares legal cannabis legislation in the summer of 2018."

A catalyst

That said, the blockchain won't be helpful simply in confirming the compliance of pot that's grown and distributed throughout the US, Canada, and other nations. It will also be helpful in creating a reliable record of customer purchases and preferences, so that growers will know just what kind of cannabis to cultivate and market.

This is exactly what's outlined in Budbo's whitepaper, which describes the platform as a system "on which dispensaries, manufacturers, and growers can get the most accurate data possible on patient and user preferences." It's also what's declared by cannabis-tech company MassRoots, which in December announced its intention to migrate its apps and systems onto the blockchain. "Blockchain has the potential to streamline [MassRoots'] collection and organization [of customer metadata]," the company announced. "This would enable advertisers to better target consumers […] and enable the development of solutions that better serve the MassRoots community."

Market research and intelligence surrounding the cannabis industry is unsurprisingly thin at the moment, so the use of the blockchain by companies such as MassRoots, Budbo, and 420 Blockchain will enable them and other marijuana-focused businesses to quickly build a substantial customer database. Combined with the other two chief benefits of putting cannabis on the blockchain – unifying a fragmented market, and demonstrating legal/health compliance – this will help the budding marijuana industry to gain new customers and find new markets.

In other words, the blockchain's ability to dependably track and record every action 'from seed to sale' will mean that it could become the cannabis industry's all-important midwife, a catalyst that enables the industry to grow when it might have otherwise have wilted.

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