Jessica McKeil   |   March 05, 2019

Blockchain for Cannabis and Hemp Transport

Could blockchain be the key to keeping legal cannabis out of the black market?
Jessica McKeil is a freelance writer focused on the medical marijuana industry, from production methods to medicinal applications. She personally found relief through cannabis for the treatment of her panic and anxiety disorder. She is lucky…

Compliance, transparency, and regulation are the main issues facing the cannabis industry today. Blockchain technology, in one fell swoop, addresses all these concerns and more with complete automatic transparency from one end of the supply chain to the other; from grower to customer with no hiccups, lost data, or regulatory stumbles along the way.

The legal cannabis supply chain today, is based on the sharing of information between different systems. As with most inefficient technologies, working between multiple networks and databases within the same system means delays, duplications, additional work, and in the worst cases lost information.

Imagine stepping back and seeing the supply chain from end to end, now imagine how many overlapping systems it currently contains. Between these different systems, are cracks. How much information gets lost as it moves between these cracks despite state or federal oversight?

The blockchain with its hyper-ledger is the single most viable end-to-end solution for the industry.  Considering the industry is already focused on a seed-to-sale approach, it only makes sense to adopt a technology which can encompass under one umbrella.

Blockchain for Dummies

For anyone unfamiliar with blockchain technologies and the hyper-ledger, you may wonder why an approach from cryptocurrency would be so applicable to real-world transactions. No matter the ongoing debate about the viability of Bitcoin, its underlying technology has a lot going for it.

The blockchain is a distribution ledger. Once data is recorded on the chain, it is virtually impossible to tamper with it.  The blockchain processes data within a “block” or node in the system. The blockchain sends the data via the “chain” to the next block or node. Once a transaction occurs, the system automatically verifies it, records it, and executes a following operation. The system is capable of handling financial transactions, information exchanges, contracts or agreements, asset exchanges and of course cryptocurrencies. Within this hyper-ledger, the captured information is transparent and tamperproof.

Implementing Blockchain for Shipping Cannabis Nationally

Both local and federal governments are facing challenges as they try to manage domestic cannabis industries. In the United States, it is still illegal to move marijuana between legalized states, because the plant remains illegal at the federal level. Which has thus far left state governments and cultivators alike scrambling with oversupply issues.

As Rolling Stone reported in July 2018, Oregon’s U.S. Attorney, Billy Williams, issued a statement alleging massive amounts of Oregon grown cannabis was seized in 30 states on the black market. All even though the state has an established seed-to-sale tracking system.

If we reimagined the situation in Oregon with a seed to sale hyper-ledger, it’s highly likely we would be having a much different conversation about it. In a blockchain based system, growers would record detailed information (size, strain, batches) of their harvests, which is immediately recorded within the hyper-ledger. Transportation companies would build detailed manifests, based on these numbers, and retailers would similarly create their inventory amounts.

Nowhere between the “blocks” of the grower, the transporter, nor the retailer does information get lost. At any point, regulators could access the full hyper-ledger as it relates to a growers' harvests, a transportations companies goods, or a retailers' inventory to confirm where the product is at any given point. There is no room within this system for the product to disappear into the black market.

International Cannabis Shipments Through Blockchain

Surprisingly, international cannabis logistics is already going on, but thus far it’s mostly restricted to medical marijuana and research. With more countries coming on board with both medical and recreational, the international cannabis trade will only continue to grow. Moving cannabis from a closed market to an open market could have a tremendous positive impact on national economies.

Due to its medicinal properties and recreational use, cannabis is always going to have a higher level of regulation surrounding it than other agricultural products, which is why an international system using blockchain could be so incredibly useful. There is no question that global regulators could benefit from a system which “enables equal visibility of activities and reveals where an asset/product is at any point in time, who owns it and what condition or state it is in.”

As cannabis shipments reach international customers, the usefulness of blockchain to provide clear, transparent, seed to sale trackability is paramount. A premium imported strain won’t get swapped for a cheap locally grown knock-off. If shipments go missing, there will be a clear record of where and when they got lost between nodes. Plus, international buyers and sellers can ensure compliance, no matter who they are dealing with and what national regulations are involved.

Top-Down Approach to Blockchain in the Cannabis Industry

If blockchain is such a good fit for the cannabis industry - why isn’t everyone at all levels clamoring to implement it? The single lingering issue with the technology is the requirement that all parties adopt the same system, with the same set of rules. As Rolling Stone put it in a more recent article from December 2018, the problem is about  “getting everybody in the ecosystem to agree to use a common platform.”

Every block must connect along the same chain, as it were, including the growers, testers, shippers, retailers, and even the customers. Whether the system is implemented at a regional, national, or international level, to reach the level of agreement needed it’s clear that blockchain must be mandated from the top down.

When it comes to blockchain startups focused on cannabis, it’s already crowded with companies like 420 Blockchain, PotCoin, and Paragon Coin. IBM recently advised the Province of British Columbia to implement blockchain before last year’s legalization, and big consumer resources like LeafBuyer have indicated they are moving towards blockchain as well. There is a clear impetus for cannabis to adopt the technology, but it will need a government mandate to ensure total adoption.

 

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