How Blockchain is Transforming the Cannabis Industry

Blockchain and cannabis have one thing in common. Both represent disruptive trends that are changing the way we do business  around the world,  especially in the United States.

From the point of view of legal cannabis producers, blockchain has the potential to completely transform an industry that is struggling with its surprisingly slow growth curve into higher returns in the future. This doesn't just apply to growers, retailers, and manufacturers affected by the impact blockchain can have on the industry.

What are the challenges for the cannabis industry? Following the legalization of recreational cannabis in many states in the United States and Canada, the transition from illegal to legal production has not occurred as quickly as expected. This has disappointed those who entered the market early in anticipation of huge demand.

Depending on the industry perspective, it is not surprising that most cannabis is still sold through illicit channels, with 80% of its volume and 60% of its value entering Canada through illicit channels. There are several reasons why the growth of legal cannabis use is not as fast as expected.

• A small number of retail stores
• The increased price of legal products
• A smaller selection of products
• Supply shortages in-store and online
• Apprehensiveness toward government-regulated product

As the cannabis industry grows and develops, many of these problems are being addressed. Licensed growers are increasing their cultivation, which has led to an oversupply of cannabis along with the slow growth of the legal cannabis industry.

Product commercialization, coupled with a recent product oversupply, is putting more pressure on legitimate suppliers to lower product prices. Perhaps most importantly, blockchain will help solve other problems by providing encrypted traceability.

How can blockchain help?

As mentioned above, government-related cannabis problems are still very common. Marketing has been extremely limited to licensed retailers and manufacturers, halting the dissemination of relevant information about the safety, safety, and quality of legal cannabis. Health concerns surrounding the use of marijuana concentrates resulted in a temporary ban on these products in areas like Massachusetts in 2019.

Although there are many farms and vendors, it can be difficult to find and consistently receive products that consumers prefer because the products on the market are so different. Blockchain is a decentralized digital technology that tracks all transactions that take place in a peer-to-peer network.

A record of these interactions is stored in a distributed network system. Each batch of transactions in the blockchain is called a block, and each block is arranged chronologically to form a chain. Because there are thousands or millions of copies of the same chain, the software can quickly check previous ledger entries. This way attempts to break the chain are quickly detected and resolved by comparison. Hacking a blockchain requires at least advanced black hat programming, along with massive computing power to make changes to most blockchains at the same time. In short, it's almost impossible.

The introduction of blockchain into the cannabis industry reduces vulnerabilities and increases transparency because the information is stored digitally and not in one central location. Also, there is no single intermediary overseeing the transaction. Blockchain has gained recognition for being used as the engine of various cryptocurrencies, but as the examples in this article show, blockchain can be applied to almost any industry imaginable. The top 10 use cases proposed by the Blockchain Council are mainly related to food safety and supply chain management. Because there are many attempts in the beverage, pharmaceutical and food industries.

Cannabis companies have an edge over other companies looking to implement blockchains and have strict traceability requirements. Since the legal cannabis industry is so new, cannabis companies are so modern that they are better equipped to easily integrate blockchain-like solutions into their workflows.

These tend to be young entrepreneurs with strong growth cultures and generally less complex supply chains/structures. Cannabis 2.0 is a source of great hope for the industry as it includes ingredients from many suppliers and can combine them into one product. The blockchain concept in Cannabis 2.0  makes much more sense as it can actually track consumer trust by being able to track the history of each product that has gone through several processes.

Transparency in the supply chain will actually benefit business owners working in the legal cannabis industry. This will increase consumer confidence and will undoubtedly move more cannabis users from illegal to legal markets. As long as people see the way to selling seeds, the quality, safety, and consistency of legal cannabis will speak for itself. There is another additional benefit of blockchain. At least in the US, cannabis is sold for cash only.

This is because the product remains illegal not only at the federal level but also in more than half of US states and territories. Cannabis companies cannot use banks that are guaranteed by the FDIC, the federal banking regulator, because there is a risk that their funds will be forfeited or lost without refund. As a result, more and more legal cannabis trades are taking place using blockchain-based cryptocurrencies such as Bitcoin or marijuana-related cryptocurrencies.

Conclusion

What are your thoughts on integrating blockchain into the legal cannabis industry? Could this solve the problem currently facing legal cannabis companies? Engineering360 would love to hear from you in the comments below!