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Blockchain is the cannabis industry’s answer for stealing market share from the unlicensed market.
While we wait for government regulators to catch up to the speeding train called cannabis innovation, consumers need protection from rogue growers and distributors. Blockchain is capable of many use cases, but it’s a perfect fit for supply chain management.
So what is blockchain? Blockchain is a digital ledger that records and tracks data and physical assets from point A to B in the supply chain. The information on the blockchain is cryptographically secure and tamper-proof—which means that no one can change data once it has been entered and verified.
The blockchain technology can strengthen consumer confidence in the cannabis industry by verifying product origin, compliance, seed verification, proof of ownership, cultivating and manufacturing processes, transactional information, location tracking, and supply chain paper trail.
Let’s break it down:
Supply chain management
Let’s get the technical stuff out of the way first- A “smart contract” is the mechanical function of the blockchain that controls how the information recorded and received on the ledger. “Miners” play a role too, but that’s for another day.
A smart contract is a computer code of instructions that sets the terms of who, what, where, and when transactions occur in the supply chain. This automated system gathers signatures, enters time stamps, tracks shipping and deliveries, and any other actions required in the process. Smart contracts execute accurate transactions and eliminate human error that currently afflicts the paper and manual based system.
In addition to automating tasks, the smart contract code triggers payments between parties. It works on the if/then system- if this happens, then that happens. For example, once a shipment of goods has been delivered, payment for the goods will get released automatically.
Like biotech and drug companies, cannabis growers need to follow strict manufacturing guidelines for safety and quality assurance. Blockchain offers proof of standard operating procedures (SOP).
There are safety issues, like controlled pesticide use, accurately measured nutrient solutions, storage temperatures, and sanitation measures that need adhering.
For instance, the manager of a plant and horticulture staff, together, would verify and record on the blockchain, a nutrients solution recipe, or the amount of pesticide used.
Cannabis cultivation is a delicate process that requires consistency and nurturing. Blockchain will validate SOP processes as they occur; plant care is monitored through all stages of the plant’s life cycle to verify product outcome and authenticity.
Proof of compliance and secured data for regulators
The USDA 2018 Farm Bill legalized Hemp cultivation and extraction for commercial use, but there are still many areas that need legalization for the CBD consumer product industry to move forward. The FDA for one.
Because of the absence of laws governing the cannabis space, everyone along the supply chain from grower to seller is in danger of breaking the law if they do not stay in step with it.
The Schedule 1 law impedes the progress in research, but once the government declassifies cannabis as an illegal substance, more opportunities will open up.
Companies also benefit from blockchain as a way to document activities and paperwork in a time-stamped method. It’s as a sure-fire defense in a court of law in the case of lawsuits or compliance accusations.
Blockchain also tracks the physical property of cannabis as it moves through the supply chain by attaching a GPS tracking device to the shipment. The device communicates the location to the blockchain as a monitor in real-time.
HEFTY fines will occur if a company does not comply with KYC (Know Your Customer) or AML (Anti-Money Laundering) laws. “Verified” client data on the blockchain is immutable and eliminates the worry of falsified records and nefarious activity.
There is the opportunity to enter false information, but it’s unalterable once recorded.
Transparency, safety, and authenticity
Consumers have the right to know the origin of the product, manufacturing process, and how it landed in stores. Currently, they go on blind trust that growers and retailers will deliver on their claims.
The GPS tracking device system verifies where cannabis came from and who handled it along the supply chain. Smart contracts collect signatures, documents, certificates, time stamps, and other data as evidence of product authenticity.
Thanks to the discovery of smart devices paired with blockchain technology to make the supply chain more efficient and transparent.
Many believe that blockchain technology is ushering in the fourth industrial revolution and impacting our economy for the better.