Is Cannabis Ready for Blockchain?

Cannabis Dispensary Magazine 

From the vaping crisis to the COVID-19 pandemic, recent events have intensified the need for transparency and trust in the cannabis supply chain to ensure packaging and products are contaminant free.

Now, perhaps more than ever, supply chain partners and customers want more information about industry practices and products.

Blockchain, steadily gaining adoption in other markets, could be the next game-changing technology for the cannabis industry. Proven in mainstream food safety, pharmaceuticals and other sectors, blockchain-powered platforms offer potential benefits for everyone, from breeders with new genetics to consumers shopping dispensary shelves.

Understanding Blockchain Basics

Cannabis attorney Braden Perry, partner at Kansas City, Mo., law firm Kennyhertz Perry, helps companies implement novel and emerging technologies, including blockchain. An expert in enforcement, digital currencies, and regulatory and compliance issues, Perry suggests the easiest way to envision blockchain is to think of it as a digital ledger—one that contains a series of unchangeable records.

Rather than transaction lines found in general financial ledgers, blockchain contains information packets called “blocks.” The blocks are connected chronologically to form a chain. They store a wide range of product-specific and transactional information, including the time and date for specific actions, product origin and process steps or product inputs. For the cannabis industry, critical data in a block might include genetic information, lab results, cultivation inputs, supply chain logistics, location tracking and consumer feedback. Blockchain has endless applications and can be used to record and track anything.

A typical end user of a product doesn’t see a block, they just see a software program interface. How the information “looks” to an end user will depend on how the blockchain-powered software product they’re using presents that data to them.

Unlike traditional databases, the blockchain ledger is decentralized. The information it holds is stored across multiple locations, entered by trusted partners and synchronized by consensus of those partners, protecting data integrity. Once created, a block cannot be changed. New data, including corrections to prior entries, result in new blocks. The original block remains constant, an immutable record of what’s within.

“From a seed-to-sale perspective, especially in today’s regulatory environment in the legal marijuana industry, the recordkeeping and reporting is very complex,” Perry says. “This automated ledger ensures [information] cannot be altered from either an intentional standpoint, such as a forgery or other type of wrongdoing, or an unintentional standpoint, such as an error.”

Overcoming Misconceptions

Perry points out that many people erroneously believe that blockchain and cryptocurrency are synonymous. Larry Levy, CEO and co-founder of Lucid Green, also notes that many in the cannabis industry have struggled to separate the two concepts. While blockchain technology makes cryptocurrency possible, they are not the same. Blockchain, free from the risks and regulatory issues associated with cryptocurrencies, can just as easily power seed-to-sale tracking systems, genetic validation or transparency of lab results.

Lucid Green, a cannabis supply chain platform, launched in late 2018 with a blockchain-empowered product QR code aimed at brand-to-consumer and brand-to-budtender education and marketing—and a token-based rewards program. The platform received strong resistance from brands swayed by misconceptions about blockchain, Levy says. “It completely blew their minds,” he recalls. “They were in a high-risk industry anyway. Then here’s another thing they see as high risk.”

Now, Lucid Green keeps it simple. “We don’t bring up blockchain because [brands] are not interested in the technology,” Levy says.

The company’s private blockchain network operates as a centralized database for now. “But the minute the industry grows up and can sustain and support decentralized, trusted actors putting data in, we’ll just switch that on,” he says.

Levy’s experience highlights another misconception, that decentralized blockchain platforms expose proprietary information to the world. With permissioned blockchain networks, you control who sees what and who creates blocks. Blockchains can be public, private or a combination of both. And, yes, separate blockchain networks can communicate.

“You can have your own enterprise blockchain where certain information is shared and other information is siloed off,” Perry says. “If you’re worried about potential intrusion or corporate espionage, private blockchains are a way to lock up the information where you only have access to it, but the reporting is secure.”

Exploring Blockchain Uses

As blockchain’s benefits become better known, blockchain-empowered cannabis-related products and services will grow. Robert Galarza is CEO of TruTrace Technologies, whose blockchain-based StrainSecure program registers and tracks intellectual property (IP) in the cannabis industry. In partnership with Shoppers Drug Mart, Canada’s largest pharmacy chain, TruTrace is piloting blockchain-secured programs to track and trace “from genome to distribution.” Decades of enterprise technology experience fuel Galarza’s enthusiasm for blockchain’s potential.

“With blockchain, we can get all the information—even the efficacy studies and consumer feedback and all of that—put into a system that can make it readily accessible by the parties that need to access it at any time, and the information is secure,” he says. “In the supply chain, it brings an integrity to this industry that we’ve never had.”

The following are some of the ways blockchain-powered technology is already benefiting cannabis and non-cannabis businesses:

1. Rapid, real-time traceability. Blockchain’s secure technology ensures an accurate, permanent record, but it also allows rapid access to specific details within the large amounts of stored information. With blockchain, businesses can instantly get a specific product’s full history and access present and past locations in the supply chain.

A high-profile, mainstream example is Walmart’s incorporation of IBM blockchain technology following E. coli scares with romaine lettuce in 2018. Blockchain reduced the time it took supply chain tracking to locate lettuce sources from seven days to 2.2 seconds. Galarza says blockchain offers the same speed to cannabis supply chains.

2. Improved efficiency and reduced costs. Labor remains one of the largest expenses for cannabis businesses, whether they operate cultivation facilities, retail shops or both. Perry believes blockchain can streamline time-consuming tracking, reporting and auditing, and eventually reduce the need for staff and oversight related to those functions. “Obviously, upfront costs are going to be there, but in the long term, businesses will likely save,” he says.

3. Product validation and standardization. Levy suggests the greatest cannabis-related potential for blockchain’s decentralized, distributed ledger lies with genetics. As Galarza points out, cannabis has long been identified primarily by street names. Under blockchain-powered programs like the Shoppers Drug Mart pilot, genetic cultivar information is being collected, registered, tested and published through the secure, permanent infrastructure blockchain provides.

Growers can protect their IP. Researchers can identify specific genetic and chemical profiles. Medical providers and retailers can be sure they receive consistent products and verify provenance, testing results, patient outcomes and other immutable information.

4. Compliance efficiencies. For U.S. growers bound to state-mandated tracking systems, Levy expresses doubts about blockchain’s promise: “From a compliance perspective, I just don’t see the need to overcomplicate what is already a very onerous process because of the whole track-and-trace requirement that the states have decreed.”

But Perry believes that part of blockchain’s power lies in compliance and enforcement. “[Blockchain] eliminates human error and the ability for mischief along the way and really eliminates any fear that a state or a regulatory body might have that anything has not been reported properly,” he says. “Being able to provide bulletproof evidence that your compliance is complete is the biggest advantage right now.”

Galarza sees opportunities for blockchain-improved compliance by supporting systems already in place. “We don’t want to replace track-and-trace. We want to empower track-and-trace,” he stresses. “We have to be the ones to support [those systems].” He says that’s done by building tools that help bridge gaps and can touch many competing seed-to-sale platforms and push information between those systems.

5. Consumer confidence. Blockchain-powered scannable codes and other technologies can increase transparency and provide end consumers with secure, verified product identification and information to drive confidence and brand loyalty.

“With blockchain, whatever way you want to show a consumer how your product is superior to others, from seed to sale, you can prove that without having to deal with claims of bias or inaccuracy,” Perry says. “I think it’s really important from the consumer standpoint to know exactly what they’re getting and how they’re getting it.”

Galarza expands on blockchain-empowered opportunities for cultivators and dispensaries. “Through scanning a QR code or some newer packaging technology, [consumers] can know what’s in this exact product and batch, down to the more granular details if you want them to see them,” he says. “It’s just a matter of saying, ‘OK, we have full, transparent traceability.’ From a quality assurance perspective, why wouldn’t we make that accessible to individual customers and patients on the packaging?”

Anticipating Blockchain’s Future

Though the cannabis industry has been slow to embrace blockchain, Levy says he anticipates rapid change: “Many of the cannatech solutions that are out there have literally grown up out of people’s basements because the big software companies didn’t want to touch a weed company.” He believes that consolidation and normalization will bring blockchain leaders into the cannabis industry. “That’s how the industry is going to grow up,” he says.

Perry agrees that mainstream blockchain platforms will enter the cannabis industry soon. “It likely willbecome much more enticing both to big technology as well as the industry itself,” he says. “Once one of those big companies gets a product out there, there will likely be a snowball effect. I really think it is the future of the industry from at least the supply chain and the tracking aspect.”

Galarza expects companies like Shoppers Drug Mart and Walmart will drive blockchain adoption as cannabis matures and supply chains grow more complex. “Companies need to know what they’re getting is safe before they put it in the hands of people,” he says. “I think that’s already what we’re seeing in Canada and what we’re seeing with the bigger companies in the U.S., where we’re seeing it a little bit more [on] the CBD side.”

Galarza advises cannabis businesses, from breeders to retailers, to look ahead and understand the infrastructure demanded by the food, drug and consumer packaged goods (CPG) industries—that blockchain-secured technologies help provide—and then work together to see the cannabis industry thrive.

“The maturity I hope to see in the industry in the next couple of years is everyone says, ‘We love this industry. We want to see it grow.’ We have to band together and do the best we can at what we do,” he says. “And if somebody does it better, then we go back to the drawing board and work harder to make what we do better. That’s the one thing that I hope to see as we evolve.”

 

Jolene Hansen - jolene@lovesgarden.com


IS COVID-19 DRIVING DIGITAL TRANSFORMATION IN CANNABIS? HOW DO BRANDS GET ON-TRACK?

The post on the left has been circulating on LinkedIn from a variety of sources and it got us thinking: Is Covid-19 to thank for the momentum in cannabis digitization? The silver lining here is these safety measures for online ordering, curbside, and BOPIS (Buy Online, Pickup Instore) have forced cannabis retailers and brands to consider their digital presence now, solving the current pandemic dilemma and also finally setting themselves up to turn the typical cannabis branding challenges they’ve faced for years to their advantage.

Why is this such an important evolution for the cannabis industry?  In the midst of the Covid-19 pandemic, Nike, the sportswear giant, was able to increase digital orders 36% to drive global sales up 5.1% to $10.10 billion because they doubled down on their digital practice, knew who their customers were, and how to reach them.  Read more at the WSJ (subscription required).  Is there a cannabis brand that is not jealous of that flexibility?   But for some, it is already an essential part of their cannabis branding and consumer experience.

HOW TO START DIGITAL TRANSFORMATION NOW: STEP 1: BRAND ASSET MANAGEMENT

This foundational step is often why brands can’t even get their digital practice off the ground. You cannot deliver a quality digital experience if the live menus, POS systems, and content providers have outdated brand and product images, made-up, incorrect, or incomplete product descriptions. Frankly, no one has the time to reach out to hundreds of content providers every time you make a change. The SOURCE powers the Lucid Green interactive packaging experience and brands also use it to distribute all their digital assets effortlessly to all digital content partners with the free SOURCE API – live menus, POS systems…you name it, instantly updated with the latest product shots, newly written descriptions, or newly launched SKU details the minute you enter them in.  Digital consistency and efficiency.

 

STEP 2: CREATING A BRAND “VIRTUAL BUDTENDER” AND NEW DTC CHANNEL

Trust and transparency have always been important, but now without the typical in-store experience and often buying from retailers online without any budtender/caregiver consultation, it has become an essential part of the brand and consumer relationship. Brands lay the railroad tracks for their digital practice by creating a brand-new DTC channel right off their own packaging using unique, unit-level LUCID IDs integrated elegantly into their regulatory labels with zero operational cost. The “virtual budtender” experience enabled by LUCID IDs allows consumers to simply point their cell phone camera at the package to instantly access all the knowledge they need to have the safest, most predictable, and most enjoyable experience with that product, even accessing batch-level COAs and specific product dosage guidance – all without needing to download an app or sign up for anything at all. Brands like Papa & Barkley, Green Revolution, Mary’s Medicinals and Foria are engaging directly with their consumers this way, creating a rich branding and product experience online or in-store.

STEP 3: CAPTURE USERS AND DRIVE ACTIVITY

How do the top brands build a true relationship with those consumers? The final component to get to know the consumers and build that relationship. Consumers are encouraged in Lucid Green to register upon scan to verify product authenticity, giving brands the most effective tool to fight against counterfeit and black-market operators who are taking advantage of the out-of-store trend, giving consumers peace-of-mind and helping pave the way to pulling those consumers into the brand's CRM. To sweeten the pull and gamify on-going interactions, brands light up Lucid Green’s built-in brand loyalty platform. Consumers earn “Bud tokens” (points) upon scan that can be redeemed later for branded swag or discounted products.  Users also track dosage, create favorites, share their favorites with friends and a host of other features - key data for a brand.  Bhang, Nuvata, Gold Flora, and Green Revolution have been using this gamified digital channel to remain top-of-mind campaigns, push new SKUs to an already receptive audience, drive online purchases, and supercharge in-store activity.

One brand that’s enjoyed a head-start on using this technology is ROVE Brand, based in CA. They have amassed 10s of thousands of registered users in less than a year, adding 100's more every day.  ROVE has activated this channel to dramatic results, running digital campaigns that can drive higher than 20% scan rates.  So while other brands suffered through the vape-scare or scramble amidst Covid-19 pressures, Rove routinely activates their DTC channel to gain market share and drive consumer engagement without the need to rely solely on unscalable in-store promotions, elusive cannabis retailer support, and the maddening tangle of cannabis advertising regulations.

Brands need to solve the Covid-19 challenges now and catch their digital practice up to match the new retail cannabis landscape. LUCID ID’s and THE SOURCE offers an incredibly deep and nearly instantaneous way to jumpstart a brand’s digital practice with minimal investment and upfront effort.

Contact Lucid Green at info@lucidgreen.io for more information and to get started today.