Blockchain Technology and the Cannabis Industry
Currently, one of the biggest news item in the world today is the blockchain. The catchy name for the less-intuitive definition of a “decentralized distributed public ledger” particularly resonates with business media. Because of the blockchain technology which prevents digital-token replication, virtual currencies, or cryptocurrencies such as Bitcoin, are made possible.
This dramatic innovation obviously has serious implications for the financial sector. Under the current paradigm, financial transactions – even more so with international transactions – require a third-party intermediary. Specialist intermediaries, such as Western Union or MoneyGram, charge a substantial fee for their services. The blockchain and cryptocurrencies allow for quicker and cheaper “peer-to-peer” transactions.
As amazing as the blockchain technology is for the economic realm, this usage only scratches the surface. Business innovators are gradually realizing that the blockchain has far-reaching implications, including that for the burgeoning legal cannabis industry.
Blockchain Standardizes the “Trust Dilemma”
Perhaps the biggest challenge in business-to-business (B2B) interactions is trust. What protections, for example, does a company have should another entity with which they conduct business reneges on a contract? Typically, such a frustrating event requires the other hated intermediary: attorneys.
Based on the necessary legal fees, a B2B dispute, or any disputed matter, may ultimately be record as a bad business expense. If it costs $100 to settle a $20 dispute, the issue is not worth pursuing. However, if the dispute could be resolved cheaply (or even freely), the negatively impacted company would obviously pursue that resolution.
This is the opportunity that the blockchain offers. As a real-world example, the Ethereum blockchain has proven the viability of the “smart contract” concept. Rather than rely on legal (human) intermediaries to help enforce contracts and settle conflicts, the blockchain (artificial intelligence) oversees the terms of any deals, facilitating easier and quicker arbitration.
While the blockchain seemingly benefits established, mainstream sectors the most, the opposite could be true. Up-and-coming industries, such as cannabis and related subsectors such as herbal vaporizer retailers, stand to gain the most from this emerging technology.
Technology and the Cannabis Industry
The legal cannabis movement has been fighting a long, and sometimes desperately difficult battle, for decades. It was only just recently in the 2016 election that sector momentum finally paid off, with a record number of states voting for legalization to varying degrees. But the struggle for full civil liberties is not yet over, and such protracted debates cost significant money.
With expenditures already made, and many more to come, the cannabis industry as a whole simply does not have the resources of hegemonically dominant organizations (read Big Tobacco). Any extra capital is devoted to core business operations and other, directly revenue-related endeavors.
The sheer beauty of the blockchain is that many of the administrative costs of running a professional organization – accounting, data verification, contractual terms, and more – can be substantially reduced. Iconic tech firm IBM is one of the biggest supporters of the blockchain technology, recently introducing the “Hyperledger,” an open-source blockchain network specifically engineered for cloud-computing enterprises. Not only is this platform a business revolution, it’s also energy efficient and therefore, less costly to operate.
It’s no stretch of the imagination to say that the blockchain, along with internal industry innovations such as portable vaporizers, is what may finally push cannabis into the mainstream. Because so many resources are dedicated to keeping the legalization momentum alive, the cannabis sector previously could not match many of the operational efficiencies of mainstream companies. With the blockchain technology, it evens out the playing field.
The First-to-Market Advantage
In actuality, marijuana dispensaries and herbal-solutions providers have a significant advantage. As detailed by a Forbes article published in September 2017, 11% of Americans that have heard about Bitcoin assumed that it was illegal to own. Startlingly, nearly half (48%) were unclear as to Bitcoin’s legality.
Keep in mind that in mid-September, Bitcoin crossed the $4,000 price point. In late November, the cryptocurrency hit $10,000 – an unprecedented milestone for digital investment markets.
What that tells us is that the concept of the blockchain and cryptocurrencies is still shrouded in substantial ignorance. The same Forbes article indicates that more than 21% of Americans have never heard of Bitcoin. That’s nothing short of remarkable given this present internet age. But more critically for the cannabis industry, whoever actualizes this technology first will be lightyears ahead of the competition.
Imagine that for a lengthy period of time, you were one of few businesses that utilized email. You would have a profound lead over your competitors who were using the U.S. Postal Service (and all its associated problems). While your competitors could adopt the technology, you would have that critical first-to-market advantage to establish yourself as an innovative, pioneering organization.
There’s a common saying in modern business: work smart, not hard. For decades, cannabis advocates have put blood, sweat and tears into the legalization movement. Clearly, significant advancements have been made. But the underlying reality is that these were hard-fought advancements. Similar to “ground and pound” gridiron football, the marijuana industry endured a game of inches.
Blockchain (thankfully) threatens to undermine the current, mainstream establishment. One of the underappreciated aspects of this technology and its derivative cryptocurrencies is that they’re on 24/7, 365.
The blockchain doesn’t care about “Thank God It’s Friday!” It has no use for federally recognized holidays. Decentralized public ledgers don’t take bathroom breaks or make demands through collective bargaining. It provides several of the necessary functions of business without the overhead associated with human operators.
In that regard, the blockchain is a godsend to the cannabis industry. The technology frees up time and resources to further the cause for civil liberties. Just as importantly, the open source platform evens the playing field against sectors that don’t necessarily have the marijuana movement’s best interests in mind.
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