Blockchain and cannabis are two highly disruptive trends that are fundamentally shifting how business is conducted across the world. Regarding legal producers of cannabis, blockchain has the potential to help an industry that has been plagued by surprisingly slow growth rates become more profitable. The wide-reaching, beneficial impact of blockchain technology can be applied to producers, cultivators, retailers and stakeholders throughout the industry value chain.
The legal cannabis market is experiencing underwhelming growth
Following its legalisation in many countries, recently including Thailand, recreational cannabis has not been met with the huge demand expected. The move from illegal to legal products hasn’t happened as promptly as new entrants to the market were hoping, meaning most cannabis is still sold through illegal channels. In Canada for example, 80% of volume and 60% of industry value still come through illegal channels. Legal cannabis growth has stalled for several reasons:
- Small number of retail stores
- Narrow product selection
- Higher price of legal products
- Supply shortages (in-store and online)
- General apprehension toward government-regulated product
Consumer apprehension concerning government-related cannabis still prevails. Marketing is heavily restricted for licensed retailers and producers, hampering the spread of relevant information about the quality, safety and consistency of legal cannabis. It will take time to solve these problems organically as the cannabis industry grows and matures.
Blockchain provides encrypted traceability that overcomes existing challenges with near-immediate effect
Blockchain is a decentralised, digital technology that keeps a record of all transactions and interactions which occur within a peer-to-peer network. Blockchain is immutable, meaning a transaction recorded on the blockchain cannot be altered or deleted. This distributed ledger system allows participants to verify an asset’s provenance and view its full transaction history – where it came from, where it’s been, who’s had ownership of it, etc.
Once validated through peer consensus, a transaction is recorded in a so-called ‘block’. The block is then given a timestamp, linked to the previous block in the chain, and cryptographically secured. Goods placed on the blockchain have provenance and an immutable transaction history that can successfully curb the sale of illegal cannabis.
Transparency from seed-to-sale boosts consumer confidence and trust
The introduction of blockchain to the cannabis industry would be influential. The tech would reduce vulnerability, promote transparency, reduce intermediary cost and increase efficiency. Transparency across the legal cannabis supply chain is what will really benefit business owners and involved. Placing this legalised ‘Cannabis 2.0’ on the blockchain is extremely beneficial as the ability to trace the full history for each product as it passes through all processes, including the crucial stages of quality validation and safety certification, would massively boost consumer trust.
Increased consumer confidence will undoubtedly have a positive impact on the number of cannabis customers moving from the illegal to the new legal, transparent marketplace. The consistency, safety and quality of legal cannabis will be self-evident as everyone is able to comprehensively see the journey from seed-to-sale.
Simplified legal cannabis transactions and easy integration into existing workflows
For some countries such as the U.S, which is separated into multiple states and territories with differing views regarding the legality, the cannabis industry is commonly a cash-only business. Continuing with the example of the U.S, cannabis businesses are unable to use banks insured by the FDIC (federal banking regulator) due to fears that funds will be seized or lost, since the product is illegal in more than half of the country’s states. There is a ripe opportunity here for blockchain-backed, cannabis-specific cryptocurrency, which doesn’t require intermediaries, to increase the ease and reduce the cost of legal cannabis transactions.
What’s more, cannabis companies possess an advantage over others that are trying to adopt blockchain and have strong traceability requirements. The legal cannabis industry is very new with typically young, modern cannabis companies that have a strong growth culture and generally less complex structures. Therefore, they’re more equipped to integrate a solution like blockchain seamlessly into their existing workflow.
To find out more about how SDLT can develop custom blockchain infrastructure to seamlessly integrate into your operational workflow, please contact Adrian Apperley directly at +66 (0) 8 1751 8308 or through .
Blockchain and cannabis are two highly disruptive trends that are fundamentally shifting how business is conducted across the…