I'm a blockchain security specialist and writer living in NY.
After a long day riding the slopes, a college student walks into a recreational marijuana dispensary in Lake Tahoe. She’s looking to kick back and enjoy the sunset, so she picks herself a bag labeled Purple Kush, a strain known for its mellow, muscle relaxation effects.
As she leaves the establishment, she has a moment of reflection. Since cannabis was legalized in California, how does the dispensary know that the product she just bought is really Purple Kush? After all, someone buying on the street has no way of knowing the strain, provenance, or what chemicals may have been sprayed on the plant.
So how have things changed, from a quality assurance perspective, since the laws started changing?
It’s a valid question. When individual U.S. states started to relax cannabis laws, starting with Colorado in 2012, it opened up an entirely new industry. As more states have followed suit, the legal cannabis sector is now expanding rapidly at a rate of 29.9% CAGR, expected to hit $66bn globally in the next five years.
But in the U.S., there are many growing pains. At the federal level, pot is still outlawed. Meanwhile, in the states where it is legal, there are different rules around cultivation, use of pesticides, testing, packaging and labeling. For example, in California, all distribution has to go through state-certified vendors, meaning that the product has to be grown and produced according to strict requirements.
These requirements for quality assurance put the onus on companies in the legal weed sector to operate a watertight supply chain. While it sounds simple in practice, the fact is that even in long-established industries, effective supply chain management is a challenge. Supply chains involve multiple parties and hand-offs, often with no shared point of truth about goods and their origins.
There are signs that things could be changing, though, for the better. If the cannabis industry adopts tech solutions like the food industry has, it could catch up extremely rapidly.
For example, IBM’s Food Trust network operates on a permissioned distributed ledger, providing parties in a supply chain with a shared system for documenting the movement of goods. Walmart was one of the first movers, achieving a reduction in tracking times from seven days to only seconds for its fresh produce. The success led others, such as Nestlé and French supermarket chain Carrefour, to join.
Could such a system benefit the legal cannabis sector? Undoubtedly. The weed industry also has bigger problems than tracking provenance, such as a black market with up to three times as many illegal dealers than legal ones in California alone. A shared ledger with visibility between cultivators, testers, distributors and even consumers, would help to create clearer delineations between black market produce and the real thing.
It’s taking participants some time to build momentum, though. Partly because the weed industry is so new. As one California salesman told the WSJ, “We’re moving from backpack to briefcase.”
The lack of unified regulation doesn’t help either, although there are some indicators this may change, according to Bloomberg Law, which describes policy working groups at the federal level.
However, while the cannabis sector continues with its growing pains, it seems unlikely that a company like IBM is going to offer a tailor-made, Food Trust-like solution to bring together fragmented players. Thankfully, some operators are better positioned to help the market find its feet.
From the supply chain tracking perspective, the EDEN platform from Multichain Ventures provides an end-to-end visibility tool based on blockchain. Multichain Ventures has a long pedigree in the legal cannabis sector, as the company that also behind payment solution Tokes. In building Tokes, which is one of the only truly reputable cannabis-focused blockchain projects, the team recognized that supply chain tracking was quickly going to become an issue. So they developed the platform to include a seed-to-sale tracking software.
Although EDEN is now industry-agnostic, the fact that it was purpose-built for the legal weed industry makes it a ready-made solution for operators needing to demonstrate provenance and quality assurance of their products to state officials.
The company is already working with Theracann, which has produced a spray system known as ETCH. The spray tags the cannabis plant with a unique molecular biomarker recorded on the EDEN blockchain. This means that every gram of end product is traceable until the point it’s sold, helping to reduce the incidences of black market products entering the supply chain. It’s easily detectable by anyone involved in the supply chain.
State-bound limitations could potentially hamper growth in the sector, so it’s a critical consideration for firms in the space that they can grow when more and more states start to legalize cannabis. Multichain Vantures’s platform is scalable, and there are several notable examples of other companies operating in the supply chain that are also proving their ability to grow with the market.
California-based distributor Manifest Seven (formerly MJIC) was the first integrated omnichannel platform for the legal weed sector, having developed seven logistics hubs across California. The company attracted a $15 million funding round in early 2019 and is currently awaiting a listing on the Canadian Stock Exchange.
Manifest Seven now offers an entire range of services aimed at the legal weed sector. These include B2B and B2C distribution channels, marketing, and branding services for suppliers and industry players, and compliance solutions. The firm’s rapid expansion led one publication to dub the company “the Amazon of Cannabis.”
In the cannabis supply chain, testing is also an integral part of quality assurance. In the legal marijuana sector, there’s none of the test joint-rolling that would be done in a black market purchase. Legally compliant testing is performed in labs, on the molecular level. One of the biggest operators in this space is Steep Hill, with labs in ten locations across the U.S.A and Mexico.
Steep Hill offers a comprehensive range of tests that go above and beyond any current state requirements, future-proofing against any requirements that may arise as a result of upcoming new state legislation. The company also operates a genetics program, having collected entire genome sequences from cannabis plants.
As things stand, the legal cannabis sector has already come on leaps and bounds, considering it’s only a little over seven years since Colorado first legislated for legalization.
But this industry still has some way to go. If the product is to become federally legal, operators in the space must demonstrate that the industry can step up. Thankfully, despite the inevitable growing pains, we’re seeing that it can.
Disclosure statement: I have no business relationship with any of the companies mentioned in this article.