The Future of Blockchain in the Cannabis Industry

Sean Caputo  |

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Much of blockchain’s initial success came from startups using digital currency to raise capital and bypass federal regulations via an initial coin offering, or ICO. After the ICO market crashed, cannabis companies began to view blockchain as a resource that could help track and validate their products.

Without transparency, the integrity of CBD oils comes into question. The Food and Drug Administration, for instance, considers CBD a supplement. This means the FDA doesn't check labels, which could lead to inaccurate marijuana concentrations — among other issues.

Blockchain, on the other hand, enables reports to be uploaded directly to the chain by distributors and viewed by users. Some organizations even use blockchain to track cannabis and hemp transactions from the grower to the end user without ever touching the product.

As blockchain and cannabis become further intertwined, the former can help lift the veil from the latter. In turn, this increased transparency can further entrench cannabis as a viable and acceptable option for consumers.

Facing Cannabis Challenges

Whether you live in a state where cannabis is legal, the plant is overtaking the marketplace. Because of the lack of established infrastructure and technologies, startups run the risk of turning customers and potential partners away from doing business with them.

In 2016, 11 million pounds of California-produced cannabis left the state — most likely headed to areas where it's illegal. California is losing money in taxation as a result and inadvertently shining a light on one of the biggest problems cannabis faces: an inability to track the supply chain between growers, processors, retailers, and consumers.

When the problem isn’t with tracking, it could be with compliance. Consumers sidestep the maximum daily amount of purchased marijuana products by hopping from store to store or simply by leaving one dispensary and returning a few hours later. For example, the city of Denver ended up revoking all of Sweet Leaf’s municipal licenses for such a problem.

Not all challenges are negative, though. For instance, 47 Nevada-licensed cannabis retailers are running out of supply due to problems with scaling to meet market demand. This failure to keep pace with demand could create an opening for unlicensed businesses to take market share, which creates its own set of legal issues.

Another issue involves doctors selling medical cannabis cards to users who don't have legitimate medical conditions. This situation has led to several negative consequences, including people who have legitimate medical conditions having to pay higher prices because of the lack of products at the dispensaries.

To resolve these issues, companies incorporate blockchain into their operations to track cannabis throughout the supply chain. This keeps data untouched and allows consumers to search for products and review them for authenticity. FTZ Blockchain , for example, uses both the Internet of Things and blockchain to educate regulators and consumers — even when demand is high.

The more cannabis companies use blockchain to resolve their issues, the better the industry will be. While that added transparency will be a huge boon for the cannabis industry, there are still other uses for blockchain.

Cannabis 2.0

The future of cannabis depends on how companies choose to incorporate blockchain into their core practices. Marijuana isn’t going anywhere, and blockchain can help industry leaders turn existing challenges into future opportunities.

Here are three opportunities for blockchain to benefit the cannabis industry:

1. Storing the Genotypes of Cannabis Strains

Strain creators are trying to patent their strains in the same way Monsanto patents its seeds. Lighthouse Genomics, for example, recently distributed certification documents for the master plants of 10 genomic varieties. Using blockchain, CEOs can enable these strain creators to store the phenotypes or genotypes of their new strains to prevent theft without the need to track documentation manually.

2. Providing Source Information

Big corporations like CVS, Walmart, and Walgreens want to know the source of CBD-based products from highly regulated agriculture. Now that the Farm Bill allows farmers to grow hemp, just about anyone can be part of the supply chain. With blockchain in place, CEOs can gain proof of product sources without the added stress of potential tampering.

3. Tracking Medical Records

The more the healthcare industry uses cannabis as a treatment, the more regulation and tracking need to be in place. Electronic medical records, or EMRs, have been notoriously difficult to implement without a blockchain system in place to determine best treatment programs and dosage outcomes. Thanks to blockchain, a system like StatePass allows CEOs to put processes in place that can streamline the EMR process for cannabis patients.

When it comes to the cannabis industry, blockchain is more than a tracking tool. It can take the industry from startup to enterprise, expanding the cannabis sector's reach while legitimizing its business with each record.

Sean Caputo is the co-founder and chief strategy officer at Augusta HiTech, a consulting firm that works with social-impact focused partners to improve their product development, software, and technological services.


Equities Contributor: Sean Caputo

Source: Equities News

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: The author of this article, or a firm that employs the author, is a holder of the following securities mentioned in this article : None


Symbol Name Price Change % Volume
WBA Walgreens Boots Alliance Inc. 55.94 1.28 2.34 4,831,583 Trade
CVS CVS Health Corporation 66.50 1.09 1.67 8,423,287 Trade
WMT Walmart Inc. 119.84 0.42 0.35 3,959,916 Trade



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