Cash Only Cannabis Business: Will blockchain technology solve the problem?
Cannabis dispensaries are at the mercy of mandates on seed-to-sale tracking and cash only business. Emerging blockchain technology could solve the problems.
Linking your cannabis business to the blockchain system helps you juggle financial transactions, supply chains, and point-of-sale detail.
Blockchain technology defined (sort of)
Most people find it hard to get their heads around the blockchain concept. It exists in a virtual world, and because you can’t see it, it’s difficult to understand.
The blockchain is a distributed ledger system made famous because of it made Bitcoins and other cryptocurrencies operational.
Now, here’s a chance to visualize what this is all about – if you are familiar with business ledgers or Excel. You can picture the ledger as a grid of columns and rows. And, your balance and income statements adjust as each ledger changes.
You might have a ledger for a product line or location. And, you would have spreadsheets for each business function involving financial transactions. This bookkeeping record of accounts includes every purchase or expenditure.
In Excel, for example, you could record a transaction on page 12 or 15, and it will immediately report on summary pages leading to the income and balance statements.
Now, if you can imagine an infinite number of ledgers working in real time, you have some picture of blockchain technology at work.
In short, blockchain technology is an algorithm created to manage cryptocurrency. More important to cannabis traffic, the technology works without a central authority, administrator, or watchdog.
Who needs it?
The blockchain is difficult to understand and communicate. And, it can be unwieldy for the average end user. Nonetheless, Entrepreneur reports, “Cannabis business[sic] are beginning to seize on blockchain for potential uses within the marijuana industry.”
While it was once a dark market device, it is coming out of the shadows. Even IBM is touting blockchain technology as part of its repertoire of business services.
But, a business like a cannabis dispensary is involved with heavy data flows and many layers of transactions. The dispensary is the nexus of data transactions with growers, processors, packagers, shippers, and suppliers. Dispensaries have financial transactions with advertisers, banks, compliance authorities, delivery services, employees, vendors, and more.
In the cannabis business, these constant and high-volume transactions are run in cash. That creates security problems, accuracy issues, and privacy concerns. Blockchain technology can resolve those problems.
As Market Mogul suggests, “With blockchain it would be easier to trace every activity and product in the market, starting with the plant and down the transaction chain to the amount sold to the final consumer, securely ensuring that producers and users do not exceed state limits.”
Why do you need it?
The cannabis dispensary business is unique. A medical cannabis dispensary appears to be a pharmacy business model. An adult-use cannabis dispensary appears to be a routine retail business. Each model has similar and separate needs in terms of data handling.
- A medical cannabis dispensary must obtain, record, and store information on the identity and medical recommendations.
- A recreational cannabis dispensary likely has additional suppliers and vendors in cannabis-infused products, edibles, accessories, and apparel.
- Both must report daily on financial transactions and seed-to-sale tracking.
Now, if you multiply the many levels of transactions and data flow, the many planes on which the business operates, and the tracking strains that must be reported for compliance, you see how complex this is for the average business owner.
So, cannabis business owners are looking for software and service providers to make this easier or take it out of their hands.
What does it do?
Jesse Seaver, a contributor to Huffington Post, suggests that blockchain technology and cannabis industry make a perfect match. He points to at least four benefits, paraphrased here for convenience:
1. The Crop: State regulations require control of the product. Reporting identifies the seed and its source. It requires data on how the plant was raised and transported. And, what chemicals were used in cultivation, processing, and packaging. The transaction details must be recorded, retained, and reported on the same day.
2. Distribution: Cannabis business owners must follow the distribution of product from the farm to the dispensary. The blockchain allows owners to locate and observe logistics. The transparency provides the reporting owners need, but they also allow the owners to identify and deal with supply chain problems.
3. End Consumer Management: Blockchain holds the information on consumers, including how much the may buy in a given period. With an authenticated blockchain ID, the consumer could use internationally.
4. High-Value Transaction Security: Dispensaries produce high-valued transactions. They pay top dollar for supply and charge high dollar payments to customers. Moreover, the transactions include levels of taxation payable to various jurisdictions. Blockchain transactions require cryptocurrency, a secure, traceable, and acceptable means of financial transaction.
You can add to Seaver’s list of benefits:
5. Scalable: There is no practical limit on the number of transactions or accounts. So, it grows easily with your business.
6. Sharable: All authorized participants can see the transactions. Everyone can watch the supply chain in action.
7. Real-time: Transactions occur in real time, and reporting does, too. At any moment, all authorized parties can track seed to sale transactions and order reports customized to needs.
8. Due Diligence: Financial compliance is accessible always, not just monthly or quarterly. It fulfills audit rules with business practices that meet GAAP requirements.
9. Descriptive Analytics: The detail contained holds information on customer and employee behavior.
10. Predictive Analytics: That same information profiles the future behaviors needed for strategic marketing.
Will Blockchain technology solve the problem of cash only cannabis business?
Yes and no! Blockchain technology presents some real benefits and real problems.
The canna-economy will embrace the technology because of its advantages. But, it will wait for the creation of software that bridges the problems areas. You will see banks and tech powerhouses stepping up to offer marketable applications.
It will wait because the technology is so difficult to understand and communicate. It will wait because the mechanism is difficult for dispensaries and customers to operate. For example, customers will need digital wallets and the ability to navigate ether, tokens, and coins.
Blockchain technology provides a great match for canna-business needs. But, banks and capital venture investors will find a workable solution before they lose the billions in traffic.