Promising Blockchain Applications for the Cannabis Industry
On the surface, there is little evidence to link the worlds of blockchain and cannabis. The former is a distributed ledger that records transactions of all kinds, typically those related to cryptocurrency. The latter is a plant-based drug used for medicinal and recreational purposes. And yet, these seemingly unconnected planets are increasingly coming into each other’s orbit.
Over recent years, we have seen many intrepid entrepreneurs tap into blockchain technology to enhance the cannabis industry. From decentralized autonomous organisations (DAOs) that enable community participation in the marijuana economy, to cannabis-based cryptocurrencies like CannabisCoin and RastaSwap, to hub ventures like the Crypto Cannabis Club, blockchain-powered solutions are rolling off the production line at an increasing rate.
Although our own business Veriheal has yet to establish a concrete blockchain use case, it has been a focus of discussion within the company for some time. One thing that seems inarguable is that the intersection of cannabis and blockchain will continue to bestow opportunities, whether for profit, improved transparency and security, or increased community participation.
The Bud and the Blockchain
Perhaps the most obvious application of blockchain technology in the world of cannabis is record-keeping. Blockchain being an immutable digital ledger, it is the perfect system to ensure transparent tracking from seed to sale, particularly in terms of verifying the origin of each plant and ingredient.
As explained in a 2018 research paper, a real-time blockchain tracking system could “reduce regulatory costs for government and red tape for business, helping to achieve governments’ objectives to enhance public safety by ensuring quality and monitoring product sales.” Blockchain tracking could also help to “undermine illegal markets to reduce crime and prevent product diversion.”
What’s more, by using a public blockchain network, cannabis companies can harmonize their disparate supply chain processes, which see startups enter data into multiple platform-specific databases. The high throughput of modern blockchains mean that they are capable of creating and authenticating trackable records of all transaction types, whether in the supply chain or B2C. The network could even record clinical cannabis research as suggested by TruTrace Technologies’ Robert Galarza.
Blockchain doesn’t just standardize processes for marijuana growers, processors, and retailers though: Its auditability is likely to be welcomed by regulators, since product and documentation tracking is completely tamper-proof.
Peer-to-peer (P2P) marketplaces are another promising opportunity lying at the intersection of blockchain and cannabis. With 19 states and the District of Columbia having legalized cannabis for recreational purposes, cannabis retailers are doing a roaring trade. On the other hand, many consumers still prefer to transact anonymously, peer-to-peer, and pay in crypto, suggesting that P2P cannabis platforms may arise in the near future. Still, the regulatory nature of the industry will heavily limit the scope of these platforms.
Speaking of marketplaces, one of them, Crypto Drops, is looking to corner the growing cannabis NFT market. The site offers a one-stop shop for those seeking to buy, sell, collect and “grow” cannabis-themed NFTs. In the near future, Crypto Drops aims to build out a virtual gamified world of cannabis collection and cultivation, offering digital breeder backs of coveted seeds that can be traded peer-to-peer. Users can also experiment by cross-breeding various strains to create more desirable products.
Naturally, Snoop Dogg has gotten in on the act. Earlier this year, the West Coast rap icon launched a limited-edition collection of “digital weed farm NFTs” for use in the mafia-themed metaverse Mobland.
Crypto and Cannabis Crowdfunding
Of course, the majority of consumers will always be most interested in the real thing: the cannabis they can touch and taste IRL. The best application of blockchain, then, would appear to be that which gets quality goods into consumers’ hands.
In order for companies to make this a reality, they need funding. And some firms are thinking outside the box to raise investment. Take Global Cannabis Capital, for instance, a fund that invests in cannabis startups in Latin America.
Recently, GCC began offering digital tokens representing equity positions in marijuana companies to investors around the world. It’s a novel idea, one that lets the fund tap into a sizable pool of backers seeking exposure to the cannabis industry. The equities in question are tokenized on the Ethereum blockchain.
With marijuana stockists still struggling to access traditional banking services and loans, we expect to see more novel crypto crowdfunding campaigns in the coming years. One venture that has come across our radar is CannaDAO, which harnesses the wisdom of the crowd by giving users a stake in a community treasury. Holders of governance tokens can propose marijuana investments to the DAO, which collectively decides whether to invest. Slated to launch early in 2023, the startup will also offer indexing, benchmarking and ratings, with the goal of becoming the “Bloomberg of the cannabis industry.”
Interestingly, the number of global cannabis users is in the same ballpark as crypto users: somewhere between 200 and 300 million. With such a sizable global audience, it’s little wonder we’re seeing exciting synergies that bring the benefits of blockchain to the marijuana market. When you think about it, it’s a match made in heaven.