This is not a post about marijuana, weed, dope, pot or whatever you want to call marijuana. Well, maybe it is, but from a technological perspective on how the legal cannabis industry is embracing blockchain technology. If you are an employer interested in the legal issues, I recommend reading through the legal alerts that my law firm Fisher Phillips attorneys have written.
With an increasing number of states (now 28) plus the District of Columbia having passed medical marijuana legislation, this new, fast-growing sector of the economy presents challenges. Even in legalized states, there are things that cannabis-related businesses can't do, particularly when it comes to banking and legal protection.
A host of startups are beginning to tackle these challenges with blockchain. They are employing the distributed, immutable ledger technology in everything from banking, finance and regulatory compliance to storing cannabis strain DNA via blockchain technology to protect growers' intellectual property (IP). Cryptocoinsnews.com put together a list of some of those blockchain companies competing in this space.
At this point, you may be scratching your head and saying to yourself "huh, what is blockchain?" To help you better understand, I've written several articles on blockchain that can provide more insight on the technology - "Blockchain What You Need To Know" and "Why Legal Marketing Technologists Need To Learn About Blockchain." In addition, I co-authored the article "Blockchain" with Joe Dewey, a partner at Holland & Knight, which focuses on the new technical developments with this technology.
If you don't have the time right now to peruse those articles, let me explain briefly what blockchain is. A blockchain is a data structure that makes it possible to create a digital ledger of transactions and share it among a distributed network of computers. It uses cryptography to allow each participant on the network to manipulate the ledger in a secure way without the need for a central authority.
If you're still confused, here is a short (2:20 minute) video by the World Economic Forum that explains it in a non-technical manner.
Eugene Lopin, CEO of Chex, a wholesale cannabis marketplace software company, believes there are a number of blockchain use cases in the industry.
"Blockchain is really interesting for the cannabis industry," said Lopin. "Let's say a transaction was made on our exchange that triggers a process where a wholesale distributor automatically packages a product and loads it onto a truck. When the dispensary receives that delivery, it has to be authenticated. You can do that using a mobile app or something like biometrics, but let's say the transaction uses a [blockchain-based] smart contract that says the container can't be opened until it's authenticated. Beyond just cannabis, that kind of asset verification could potentially be disruptive down the road for something like international commodity trading."
Bitcoin is an option, but legal cannabis also has pot-specific cryptocurrencies vying for relevance and staying power. The most valuable currently is PotCoin at more than $2 million. Potcoin can be used by merchants and users to simplify payments, record business processes, and address security issues.
Another interesting use case of the blockchain technology is one focused on the DNA of the different cannabis strains. Medicinal Genomics, a Boston-based company is using a service called StrainSeek to map and sequence the different strains of cannabis, then register that information and store on Kannapedia, its public-facing cannabis strain blockchain.
Kevin McKernan, co-founder and Chief Scientific Officer at Medicinal Genomics explained how the company uses this kind of blockchain sequencing in different ways.
"Strain mapping can tell growers what all their neighbors are in the field; the genetic distance between their strain and everything else on the market," said McKernan. "That can also be very handy for consumers looking for a strain in another state. It's almost a dewey decimal system for dealing with the error rates and counterfeiting in the industry."
Currently, Medicinal Genomics has more than 1,000 strains currently in their database and around 420 in Kannapedia.
Mapping strain DNA to the blockchain also protects the intellectual property (IP) for the grower. Blockchain-based strain DNA data, or a "blockstrain" can serve as irrefutable, timestamped proof that a grower does own that IP according to Mike Catalano, Senior Director of Marketing for Medicinal Genomics.
While a number of different industries are beginning to explore blockchain technology applications, it is clear the legal cannabis industry is one of the early adopters in terms of implementation. It should be interesting to watch as this industry continues to grow and develop.
Originally published on LinkedIn.