Can Blockchain Solve Some Of The Aches Of The Cannabis Industry?

By MERRY JANE's David Silverberg, provided exclusively to Benzinga Cannabis.

Blockchain may be the solution for the many regulatory and oversight issues plaguing the cannabis industry — and the benefits have nothing to do with Bitcoin.

A critical question every cannabis consumer will ask at some point is, “How do I know what I’m buying is exactly what it says it is?” In recent years, blockchain is fast becoming the answer — and it has nothing to do with cryptocurrency.

Blockchain, a decentralized and transparent digital ledger, has found favor in the cannabis industry, most notably in tracking, tracing, and genome data. A strain’s genetics are stored in a smart contract — which enforces a relationship with cryptographic code — and information is added during each processing stage. 

Seed-to-sale tracking innovations are being led by companies such as TruTrace Technologies (OTC: TTTSF) and Paragon in LA, and Parsl in Australia. Coin.io, a supply chain integration company, even partnered with cannabis extractor Mile High Labs in Colorado, too. They all provide B2B solutions that aim to tackle two pain points common in the cannabis industry: reform the inventory tracking system, and provide cannabis customers with exact details of a product’s lab test results, packaging dates, and cultivar.

Those lab tests speak to the processes and ingredients found in every batch of cannabis from every grower, producer, and dispensary. The cannabis has to be tested for heavy metals, pesticides, mold, and other contaminants, combined with potency and terpene levels. Labeling and testing requirements vary from state to state, but they are often draconian, and transferring details from a dispensary’s in-house point-of-sale system to the state’s tracking system has a lot of moving parts. 

For the consumer, all these moving parts can be difficult to collate in one place, but a QR code scan or a similar tag can feed all that data onto a smartphone. Also, consumers want to know how rigorous the testing was done on their product; after all, Oregon’s cannabis testing system got audited this year and was found to “lack of an adequate verification process for cannabis testing results.”

In a country as vast as Canada, where recreational cannabis is now legal, some IT giants have set their sights to overhauling the country’s cannabis-inventory approach: IBM IBM proposed that blockchain technology could provide an entirely transparent, tamper-proof system to track BC’s bud “from seed to sale.”

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“Blockchain is rapidly becoming a world leading technology enabling the assured exchange of value in both digital and tangible assets, while protecting privacy and eliminating fraud,” the IBM report explains. “Its relevance to regulating cannabis is similar to its many chain of custody applications in areas such as pharmaceutical distribution and food chains. The core to those supply chains is the same, assuring health and safety of consumers, preventing fraud and counterfeiting while creating a foundation of transparency upon which to base regulation.”

Above, TruTrace's QR codes affixed to a cannabis water brand

In California, TruTrace brought its blockchain-enabled StrainSecure technology to a cannabis water company. They affixed QR codes on its bottles that customers can scan and quickly learn about its test results, gleaning details about, say, THC content or terpene profiles.

In an interview, TruTrace CEO Robert Galarza told MERRY JANE, “We truly see blockchain being utilized not only to secure product identification and location, but also securing patient and consumer data to be able to connect verified products with verified patients.”

Paragon CEO Jessica VerSteeg told MERRY JANE in an interview last year that government officials don't feel comfortable with some states’ seed-to-sale tracking system. “If they can't see the info 24/7, why are they going to trust this space if they can't track and trace everything properly?”

Perhaps that’s why Rhode Island is open-minded about adopting blockchain to be implemented in a variety of government departments, particularly in the state’s cannabis tracking system. Australia’s Parsl was among many blockchain companies that applied to Rhode Island’s open call for RFPs focused solely on bringing blockchain tech to its cannabis supply chain.

Pharmaceutical companies with cannabis divisions have been looking to blockchain to boost their track-and-trace software. TruTrace recently partnered with Canada’s Shoppers Drug Mart chain, with about 1,300 pharmacies across the country. The pilot program will harness blockchain to identify, track, and verify the source and genetics of cannabis used by medical patients.

“In cannabis, there is no NDC number [the code used to identify drugs in the U.S.],” Galaraza said. “There’s an integrity problem with cannabis, and product consistency is so important to pharmacies, who truly need to be the most knowledgeable folks when it comes to medical data.”

In a statement sent to MERRY JANE, Ken Weisbrod, Vice President of Shoppers Drug Mart, wrote, “The source of medical cannabis must be traceable and accountable for patients and practitioners to feel confident about it as a treatment. When a patient takes medication, there is an expectation that it is standardized, and they can expect consistent clinical outcomes and results. Although that's not always a guarantee within the medical cannabis industry at the moment, we're hoping this new program can help change that.”

When there’s a hub for Big Data in the cannabis industry, it should allay the worries of cannabis lovers unsure about regulation and oversight. Sebastien Pasquali, IT director of CBD isolate extractor Mile High Labs, explained, “The cannabis market is under the spotlight and it’s important for companies to be transparent about their data, especially when it comes to a product’s origin.”

He noted that adding blockchain to their supply chain operations “demonstrates our commitment to quality assurance.”

Brian Glick, CEO of Chain.io, which is working with Mile High on adding blockchain to their product line, commented in a press release, “In more traditional industries, such as food production and pharmaceuticals, there are legacy systems and long-established ways of thinking. Because Mile High Labs is building something from scratch, they have the opportunity to do things right the first time and set an example for the rest of the industry to follow.”

Another benefit of blockchain is giving dispensaries a better way to conduct due diligence on products being supplied by growers and distributors. Is that strain truly Gorilla Glue? When someone claims that the CBD content in this or that flower strain is higher than its THC figures, can we trust those lab results?

Galarza of TruTrace sees this new emerging segment of blockchain-friendly cannabis companies as amicable competition, and he stresses the importance for everyone to be working together, not against each other. “When you mine for gold, you need a shovel, pick, and axe. If this industry is going to grow, we need all picks and shovels and axes to collaborate.”

See Also: High Tunes: How Cannabis Dispensaries Choose Their Soundtracks And How They Impact Sales