At over $6.7 billion, the marijuana market needs a secure method to aid distribution and blockchain may be the perfect solution
Legalized marijuana popped on the scene, Jan. 1, 2018, in California, with nine other states including New Jersey, Maine and Vermont poised to follow. For a plant with its stigma, legal cannabis needs all the help it deserves. Here’s how blockchain gives marijuana buzz around the bud.
For Cannabis Inventors, Advertising and Marketing Experts
If any business is expensive and frustrating to market, it’s marijuana. Small businesses and cannabis-based inventions, like the ICAN cannabis vaporizer for asthma, marijuana-infused dog munchies, hemp ale and a Cannabis Christmas Calendar, all need intellectual property attorneys to patent and unscramble advertising and marketing regulations. An IP attorney costs anywhere from $2,000 to $22,000, depending on the complexity of the invention. With its peer-to-peer verification, the blockchain eliminates this expense and hassle.
The blockchain cheaply and simply streamlines patents, eliminating the 32-month to three-year wait for patents to be reviewed and approved. Small wonder, then, that according to Coindesk, the rate of blockchain applications almost doubled in 2017.
When it comes to marketing, entrepreneurs use the blockchain to avoid the dollars of social media advertising (like banners, Facebook or Google ads and the like). Marketers find blockchain faster, easier, cheaper and more effective than offline marketing campaigns, aside from which no intermediary interferes with, changes, or cuts advertising copy.
Instead of a third party selling your data, you’re selling it to viewers yourself. About 17.3 percent of marketing emails are spammed and about 41 pounds of “junk mail” a week are trashed. A classic study by Kenan-Flagler Business School found that “cold calling has only a 2.5% success rate.” With the blockchain, marketers know that recipients receive their ads. It’s an easier, cheaper, more convenient and direct route. At the same time, data analysis is much easier and more accurate, since blockchain transparency instantly tells you who buys the cannabis product and their response.
On top of that, you’re the first to market. Say, you are the standard storefront business, you’d need to wait months to get your store up and ready. Blockchain launches your business on its platform that same day.
It’s no surprise that a growing stream of cannabis entrepreneurs launch ICOs to market their wares. These startups include PotCoin, CannabisCoin, GreenMed.io, MetalPay, HempCoin, DopeCoin, and WeedCoin. Each is highly successful. Paragon Coin, for instance, offered $100 million worth of Paragon Coins at $1 apiece. Within the first months, the company raised $25 million.
For Dispensaries, Producers, Cultivators, and Labs
The blockchain provides the transparency and security needed for a product that must be quality controlled and regulated. Questions range from the amount of THC and CBD used, to who is growing the plant, how they’re growing it, and how much they’re growing. Distribution must be supervised, too. Does the amount shipped from processing plant to retail outlet match the amount sold to consumers? Dispensaries are only allowed to allocate a certain amount within a given time and only to certain consumers.
Then comes the question of distribution. You need a system that’s hugely secure and financially easy to transport the high-volume mass of an industry that has raked up $6.7B and growing.
Other hassles include managing and monitoring the logistics of inventory management and tracking, data integrity, and a thorough and accurate accounting and cash management system. Blockchain performs each of these tasks by executing instant P2P delivery, encoding data on its platforms, and by programming self-executing agreements called “smart contracts.”
Likely one of the greatest problems that cannabis entrepreneurs have is where to stash their profits. While cannabis has been permitted in 29 states and Columbia, it remains illegal under the Schedule One federal law. Most banks refuse to play with the stuff or to touch marijuana accounts. Banks have to tell the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCen) when they establish a relationship with a known Marijuana Related Business.
Some cannabis businesses have found a way around that by reluctantly converting their proceeds to cryptocurrency and from there to cash. At least for the moment, the blockchain remains their solution.
Most governments are obsessed with regulating cannabis, but their work is regularly undercut with practices like illicit marketing and fraud.
To that end, IBM told the British Columbia government that blockchain technology could provide a secure way to track the legal sale of its cannabis. On Nov. 2017, IBM said: “Blockchain is an ideal mechanism in which BC can transparently capture the history of cannabis through the entire supply chain, ultimately ensuring consumer safety while exerting regulatory control – from seed to sale.”
Blockchain, IBM pitched, can be trusted because “[it] uses a cryptographically-secure shared ledger to irrefutably track complex transactions amongst many known parties.”
Admittedly, that’s not so simple, since criminals can still go underground with Bitcoin variations like Monero that leaves no trace of their dealings. Blockchain has a history of scams, with Silk Road’s 2013 drug smuggling being Bitcoin’s most famous heist.
Still, Bitcoin and Ethereum, the most popular platforms, do help prevent fraud by providing a simple open interface that helps businesses and regulators inspect data on the flow of goods within seconds.
As IBM pointed out, blockchain helps retailers take control of sourcing, selling and pricing of legal cannabis products, thereby reducing or eliminating illegal sales. The blockchain also assists cannabis entrepreneurs with real-time inventory management, improves projections of supply and demand, and provides feedback mechanisms to cannabis producers.
That’s beside the benefits that blockchain provides cannabis investors, advertising and marketing experts.
Are cannabis and blockchain a goodly mix?
Some call it a match made in heaven.
Others say that this particular heaven is bound to fall.
“We have a bunch of shops that accept DopeCoin, but no one uses it,” says Adam Howell, creator of DopeCoin. DopeCoin is the cryptocurreuency for selling cannabis in order to provide the billion dollar industry with a safer and faster way of doing business.
According to Howell, “I haven’t seen one actual dispensary or marijuana company use one of these marijuana cryptocurrencies to store their money or conduct daily business. It’s more of a gimmick at this point.”
Nonetheless, it’s indisputable that a revolutionary vehicle is needed for a revolutionary industry. Blockchain for cannabis does the trick.