How Blockchain Could Solve Problems in the Marijuana Industry

Blockchain Marijuana Cannabis Now

Cryptocurrencies like Bitcoin and Ethereum  represent an exciting but volatile investment, but their foundation — blockchain — is already being embraced by established corporations as a solution for many issues facing the emerging legal cannabis industry.


Most conversations about the cryptography software of blockchain are focused on the explosive unpredictability of the digital currencies it backs.

But where the world of Bitcoin, Ethereum and other cryptocurrency is awash with speculation and excitement, there’s a rising tide of sober interest in the numerous applications of blockchain technology, which represents a transparent, practically incorruptible “distributed ledger.” This means that all changes happen in real time where all parties can see them, making it truly transparent.

Venture advisor and entrepreneur William Mougayar describes blockchain as collaborating on Google Docs, when you previously were working from a traditional word document.

From Block Geeks: 

“That’s how databases work today. Two owners can’t be messing with the same record at once. That’s how banks maintain money balances and transfers; they briefly lock access (or decrease the balance) while they make a transfer, then update the other side, then re-open access (or update again),” Mougayar said. “With Google Docs (or Google Sheets), both parties have access to the same document at the same time, and the single version of that document is always visible to both of them. It is like a shared ledger, but it is a shared document. The distributed part comes into play when sharing involves a number of people.”

One big indicator of the perceived future utility of this technology is the size and type of companies taking bets on it — namely, big, stable companies. For example, Walmart is even experimenting with using blockchain to track livestock movement in China. Why? Because in the event of a safety recall, quickly tracing the source of contaminated meat can mean the difference between life and death.

What about bud and blockchain?

When the government of British Columbia — which along with the rest of Canada is rolling out a legal adult use system this year — called for ideas on tracking sales, preventing minor use and diversion, IBM floated out the idea of using blockchain to track sales.

Blockchain could also be used commercially for authentication and counterfeit prevention. This feature is already being used by the diamond industry and explored by fine wine manufacturers, and it has great promise for cannabis.

There are also already companies committed to collecting genetic information about cannabis, like the Phylos Galaxy, and many emerging regulations call for seed-to-sale tracking to prevent diversion of legal cannabis to the illicit market. So by cataloging the origins and genetic makeup of a strain through blockchain, all parties to a transaction can see what’s being bought and sold. That’s kind of a big deal for an industry that regularly sees unscrupulous sellers mislabeling product to boost their margins.

Another big potential advantage of blockchain is the ability to make automatic contracts, which remove trust barriers from the equation when handling large transactions. The cannabis industry needs to run smoothly, and there isn’t always time to verify product authenticity.

Think of it like this: If you blew a couple hundred bucks on a bottle of Johnny Walker Blue, then got home and found out the bottle was really full of Jack Daniels, you’d be understandably upset. And that kind of experience can really shake consumer confidence in the legal market at a time when it needs to engender as much confidence in the consumer as possible. With the proper application of blockchain, there’s no opportunity for deception: the blockchain will record a pound of product when it enters the marketplace, and at every step of its journey, all parties to the transaction will know exactly what they’re dealing with.

What about Bitcoin?

The legal cannabis industry has a serious banking and cash problem because of federal prohibition: Cannabis is the only (legal) multi-million dollar business that runs on $20 bills, and it represents both a business hurdle and a source of potential danger because of theft.

Digital currency might represent a solution moving forward. However, the most recent IRS victory in their case against Coinbase, and their decision that cryptocurrency is a taxable asset, further cloud the already muddy waters surrounding cryptocurrency as an actual banking solution for legal cannabis.

TELL US, do you see potential for blockchain in the legal cannabis business?

Greg Zeman is the Associate Editor of Cannabis Now Magazine. His previous editorial credits include Staff Writer at a national political news site (Politix), Editor-In-Chief of a bilingual San Francisco newspaper (El Tecolote) and Founding Editor of an investigative journalism non-profit (Bay News Movement). His writing has been featured in SF Weekly, SF Evergreen, 3200 Stories, Offbeat and elsewhere. He wakes up at 4:19 but doesn’t leave the house until eleven past seven.

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