Based on the latest report from the Brightfield Group, a company that focuses on market research and insight into the legal cannabis industry, the global market for cannabis is slated to hit $31.4 billion by 2021. The report also states that the market is currently worth over $7.7 billion and will witness a compound growth rate of 60% every year as other nations liberalize their cannabis laws.
A year back, Canada officially declared that they would make recreational use of cannabis legal, and emphasize on the production and distribution chain. The cannabis market in the country in November 2017 looked red hot, according to a report from Namaste Technologies, a Toronto-based marijuana company. So far, 29 US states have legalized the use of the herb, in various forms, either for medical or recreational use. At a time when marijuana is rapidly becoming a widespread tangible and legal asset, the world now requires an effective technique for assured accountability.
The Answer Lies in Blockchain Technology
The reason why cannabis and blockchain is such a perfect match is that there are many aspects of plant legalization that entail verification and authentication at a heavily regulated level. The path of flow of cannabis from the producer to the consumer has to remain legal, and many checks need to be made.
Here are some ways how blockchain ledger can provide ideal security and transparency for the cannabis industry in general:
- Tracking Marijuana Sales and Record
Colorado lawmakers rolled out a new bill that will use a chemical agent to track the sales of cannabis and record them on a blockchain ledger. This bill has been passed considering the high rate of growth of illegal deals. For instance, some dispensaries sell cannabis that wasn’t grown in a licensed dispensary, or breach regulations by shipping it out of state. It’s not hard to imagine illegal growers wanting a piece of the cake, with the industry booming.
But how will blockchain be used to secure everything from genomic information to photo ownership and much more?
The plan is that each marijuana plant would be dosed with the chemical agent, and when scanned, would show whether the plant was grown and sold by an authentic business. The agent will contain identifiers that can be easily traced using distributed ledger technology and will store records and besides helping in identifying whether the cannabis is legal, medical or just industrial hemp.
- Smoother Transactions
In particular, blockchain will resolve a number of apparent issues with today’s payment networks, such as long –wait times for processing and settlement, and massive transaction fees caused by financial institutions, who act as middlemen during these transactions. Transactions that are processed on blockchain won’t include middlemen, which will drastically reduce fees. Furthermore, they will be proofed 24 hours a day, 7 days a week. This will allow transactions to take place in real-time- within a matter of seconds.
Very often cannabis businesses are forced to create partnerships with capricious payment processors since the Federal Deposit Insurance Corporation (FDIC) does not ensure any financial entity for transaction related to cannabis. Because of this, growers and retailers resort to illegal practices to hide their cannabis connection. As a result, cannabis businesses are now bypassing traditional banking and digging into the world of cryptocurrencies that offer superior security and transparency, eventually wiping out the use of credit and debit cards.
Also, since blockchain ledger records are changing, or immutable, their transparency would, therefore, be ideal for banks looking to audit marijuana firms, as well as government intuitions planning to tax such businesses and regulate the industry.
- Manage Supply Chain
Blockchain can also better manage the cannabis supply chain by pinpointing the inefficiencies, which are way superior to paper-based trials. By eradicating paper and building a real-time trail that can be followed by businesses, blockchain will allow marijuana companies to enhance their operations and reduce costs.
The technology can be instrumental in capturing the history of marijuana through the entire supply chain, ensuring consumer safety while exercising regulatory control-right from seed to sale.
The idea of using blockchain in the marijuana industry started in late 2017 when IBM argued that the technology could assist government officials better track the source, pricing and sale of cannabis. They also stated that using blockchain would make cannabis businesses less prone to cyber attacks. Here are some ways how blockchain can help every involved party in the supply chain:
Blockchain can assist the government to regulate sourcing, pricing, and selling of products, thereby eliminating or reducing black market sales completely.
The technology can facilitate producers with real-time inventory management, higher projections of supply and demand, and obtain consumption trends through data analytics.
An interconnected blockchain network could possibly help retailers identify supply/demand gaps and mitigate them by providing a feedback mechanism to producers, and use the information to chalk out predictive insights.
- Ensure quality control for medicinal cannabis strains
Medicinal Genomics Corporation (MGC), a top solution for safe, quality cannabis, is collaborating with many medical cannabis dispensaries and cultivators to record and regulate the genomes of marijuana strains on blockchain. This indicates that the DNA sequence cannot be manipulated, which ensures quality and consistency of medicinal varieties.
The number one challenge faced by patients is the inconsistency of strains persisting from the same growers on account of minor alterations in the way marijuana is cultivated. But these tiny differences translate into unstable THC/CBD proportions, which can have a considerable impact on treating the symptoms of the disease. Based on their condition, patients need a particular cannabinoid profile for productive treatment. If the strain they are administered is different from the required cannabinoid profile, the symptoms can get complicated.
With blockchain having enormous potential to become a top inventory of strains, patients do not need to take a leap of faith with a dispensary or a grower. In addition, the DNA of the strains will be displayed to everyone, and so patients can have the entire information on the THC/CBD content. This will reduce the asymmetric information in the market. The technology will also serve as a brilliant resource for physical care providers to scrutinize and select the ideal strain for their patients.
While blockchain is still in its nascent stage, there are remarkable opportunities that the government, companies, and the industry should explore. Regulations for the legalization of marijuana and cryptocurrency are being decided even now. However, now is the right time to make a monumental change and move in the right direction considering that anything is possible with blockchain technology.