If you're anything like us, words like 'cryptocurrency', 'non-fungible token' and 'blockchain' leave your brain feeling like it's going up in smoke.
But the reality is that these terms are not going anywhere anytime soon - and in order to embrace the future and all that comes with it, it seems like it would be smart to try to keep ourselves up to speed with tech talk and get a grip on some of these fresh concepts.
Especially since it's looking more and more like the intersection of cannabis and crypto could be a gamechanger for our budding industry...
So here we are, taking the plunge on your behalf by taking a look at why that is, and in the process hopefully arming you with a lowdown that will make it easier to suss out what this new digital frontier is all about.
THE ABC’S OF NFT’S
First things first - let’s get friendly with the lingo. Here are 3 key concepts that you’ll need to wrap your head around:
Cryptocurrency: For the purpose of setting ourselves up for sensical success, it may be good to start by establishing what exactly cryptocurrency actually is.
Broadly defined, cryptocurrency is a virtual asset that takes the form of tokens or “coins”. They are like casino chips or gift cards, in that they provide a payment method that can be exchanged for certain goods and services. And believe it or not, there’s much more to this burgeoning industry than just Bitcoin. As of January 2021 there are now more than 4,000 cryptocurrencies in existence.
Unlike paper money or actual coins, these currencies only exist digitally in the form of unalterable ledgers, and function via a dispersed peer-to-peer network of computers rather than through any central server or authority (like that of a major bank). This means that power over it is decentralised, with there being many different eyes on the system and no single institution or person in charge of making decisions or changes to it.
Blockchain: Blockchain refers to the simple technology that allows for the creation of these ledgers. Each block is like a page in the book of the historical transactions of any given token, with cryptography linking each block to the one before it.
Blockchain’s superpower is that this method of recording information makes it incredibly difficult to hack, manipulate or cheat the system - meaning that transactions between thousands of strangers are kept completely honest, consistent and transparent through the chronological record that blockchains represent.
Non-Fungible Tokens: NFTs are digital assets in the form of secure files that validate ownership for something. They are completely unique and so cannot be traded like cryptocurrency, but can be bought and sold like any other piece of property.
Essentially they are like any other physical collector's item, but instead of getting a vintage car or an oil painting, you would receive an encrypted JPG file.
OKAY, BUT... WHY CANNABIS & CRYPTO?
As is often the case in the world today, we tend to glean our predictions and precedents around modernisation from the good old United States of America. And since they are currently the country blazing the legalisation trail, it makes sense that we would take our cues and clues around cannabis and cryptocurrency from what is going down across the Atlantic.
As of last month, 35 of the 50 states in the USA have now legalised medical cannabis and 17 states have legalised recreational cannabis. But with cannabis still criminalised at a federal level, banks can’t work with cannabis companies without essentially laundering money (processing dirty money earned from crime into legitimacy).
This means that most cannabis businesses are forced to operate without credit cards, bank accounts or loans, which naturally presents massive obstacles in the growth of these enterprises and inhibits the progress of the cannabis industry at large. New cannabis businesses don’t have access to the capital they need to get off the ground, and many existing ones struggle to operate by using cash to pay their staff, rent, taxes and suppliers.
This logistical dilemma is the context in which cryptocurrency shows up to help save the day.
Cryptocurrencies offer a fast, transparent and secure solution to cannabis businesses that can help them bypass their battle with the traditional banking system, and entirely avoid the cash-centric daily operations that make them prime targets for theft.
And taking into consideration the nature of the goods being sold, another appealing part of crypto and blockchain technology for the cannabis industry is the greater sense of trust instilled in customers as a result of the seed-to-sale traceability of the products they are purchasing.
So bearing these benefits in mind, as well as the often noted similarities in the audience and consumer base of cannabis and cryptocurrency, the number of cannabis-specific cryptos out there is growing like…a weed.
A FEW FRONTRUNNERS
PotCoin ($POT) : Launched a lifetime ago back in 2014, PotCoin is known for being one of the very first on the canna-crypto scene. It was conceived of as a token used to facilitate transactions within the legal cannabis industry, allowing consumers to buy and sell cannabis products anonymously.
CannabisCoin ($CANN) : Another cannabis cryptocurrency early onto the scene in 2014 was CannabisCoin, developed as a payment solution for medical marijuana dispensaries. What makes this crypto particularly interesting is that each coin represents real strains, designed for one coin to be exchangeable for one gram.
Tokes ($TKS) : Tokes is a crypto centered around transactional protocol in the cannabis industry, providing merchant gateways and software solutions to facilitate the online payment, transportation, security, genetic testing and taxation of cannabis products.
HempCoin ($THC) : HempCoin was developed to facilitate transactions in the cannabis supply chain between farmers, distributors and growers - but with a platform that offers valuable scientific analysis, algorithms and insight into the functional operations of each of these parties, it is now used in all areas of agriculture and not just for cannabis.
Grow.House ($GROW) : At a first glance of the Grow.House corporate manifesto it looks like any other cannabis crypto - stating its objective as being the use of the $GROW token “to decentralize the cultivation of medicinal cannabis, and the payment and distribution of related products on the blockchain.”
But read a few pages further into the PDF and you’ll discover that what makes this one particularly fascinating (see: mind-boggling) is that Grow.House is also an NFT game, where users can grow and harvest virtual cannabis, earn $GROW, collect NFTs and learn about yield farming. Ambitiously, their hope is to one day be the token that powers the entire cannabis industry.
CRYPTO-CANNA CONCERNS & CAVEATS
However, there are naturally a few issues that these cannabis cryptocurrencies have to contend with.
At this stage one growing pain they’re facing is adoption by the public, being that cryptocurrency is still met with confusion and apprehension by many people. Cannabis-specific cryptos have an even harder go of things - for context, $POT is the most established one out there and it only ranks #1214 in CoinMarketCap (a price-tracking website for crypto assets).
A more significant problem is that the value of cryptocurrency is notoriously volatile and changes daily, so businesses face great financial risk depending on the success of their chosen coin. Cryptocurrencies are also taxed differently from regular business income, with every transaction needing to be tracked alongside the value of that cryptocurrency against the dollar at the time of the transaction. It can be time consuming, costly and an overall headache.
And while it’s apparently not an issue making enough headlines to hinder the progress of cryptocurrency on the whole, it is worth remembering that Bitcoin alone wastes enough electricity to add 40 million tonnes of carbon dioxide to the atmosphere a year. Not a very green direction for the cannabis industry to be heading towards, considering its very existence hinges on a plant...
SO… WHAT NOW?
Ideally cannabis businesses would be able to access traditional banking services so that they could operate just like any other business, which is what the Marijuana Opportunity Reinvestment and Expungement Act is trying to achieve.
The MORE Act, backed by Amazon and currently awaiting a vote at the US senate, is a proposed piece of federal legislation that would deschedule cannabis from the Controlled Substances Act and hopefully grant cannabis businesses the rights to regular banking. But even then, stigmatisation and sensitivity around legalisation could mean that banks charge cannabis companies inflated fees and interest rates for their service.
So if cannabis and crypto is indeed the way to go, cannabis businesses could also simply choose to operate their finances using non-cannabis specific cryptocurrencies that are more stable and popular, with dispensaries encouraged to offer this payment method to help it gain momentum.
However, one of the most exciting cannabis crypto ventures is Nevada’s partnership with Multichain Ventures Inc - a blockchain company who it has contracted to create a tokenized, closed-loop financial ecosystem for the state’s legal cannabis industry.
This system would offer customers a tailor-made stablecoin (meaning it is tied to an actual currency to stabilise the price - in this case, the US dollar) to use for purchasing, and provide a convenient and secure way for companies to pay their taxes. Experts believe it’s only a matter of time before other states and businesses also decide to take financial matters into their own hands, and follow suit with similar strategies.
Either way, while the Cannabis x Cryptocurrency collab may still be busy finding its feet, it is undoubtedly a pair with a promising future that is becoming increasingly ingrained into the industry and will help it evolve more rapidly than ever before.
So even though our brains (and yours) may be fried from trying to figure all of this out - we’re also extremely hopeful, and excited to see what happens next.