Marijuana Business Magazine September 2018

CannaChain Technologies to develop a blockchain-based seed-to-sale tracking system. In 2016, former Miss Iowa and “Amazing Race” contest- ant Jessica VerSteeg founded AuBox , a luxury marijuana delivery service in the San Francisco Bay Area. She fol- lowed that with Paragon , a blockchain-based ledger for the cannabis industry, and ParagonCoin , a cryptocurrency for marijuana transactions. But in January, a class-action lawsuit was filed against California-based Paragon, alleg- ing the company spent proceeds raised in an initial coin offering (ICO) to buy real estate rather than transform the marijuana industry. An ICO is the cryptocurrency version of an initial public offering of stock. Nuvus Blockchain , a subsidiary of Nevada-based Nuvus Corp. , an ancillary firm specializing in agricultural and other types of technology, is working on a comprehensive block- chain platform for the marijuana industry. To finance the effort, Nuvus is trying to raise $100 million through an ICO. Tempe, Arizona-based Alt Thirty Six , which uses the cryp- tocurrency Dash, has partneredwith Los Angeles cannabis software company WebJoint to provide access to its digital transaction system for the marijuana-related businesses Webjoint serves in California. Greenstream , a Montreal blockchain-focused company founded in 2013, is trying to break into the cannabis sector by building a blockchain-based, supply-chain system. The GSX Pilot Project is intended to address both seed-to-sale and payment-processing challenges in the cannabis space. TheraCann International , a global cannabis business and technology firm in Calgary, Alberta, and Tokes Platform , a digital currency and software development company in Las Vegas, are developing a blockchain-based platform, TheraCannSystem, which includes seed-to-sale tracking and cryptocurrency payment features. BlockStrain Technology was born early this year, when it conducted a reverse takeover of Scorpion Resources , which had few assets and was formed to acquire other companies. In early May, BlockStrain raised $8 million (CA$10.5 million) and a few weeks later listed on the TSX Venture Exchange. TheVancouver, British Columbia-based company has secured a few clients, including licensed producer WeedMD . Outside the cannabis sector, a group that included Citibank , Goldman Sachs and J.P. Morgan participated in a $20 million Series A funding round for Axoni , a company developing blockchain solutions for financial institutions. – Omar Sacirbey But blockchain is in many ways unknown and unproven, making it a par- ticularly risky bet. Indeed, the technology has more than a few skeptics in the can- nabis industry.They argue that blockchain promises more than what it can deliver – and what it can offer isn’t much different than what other technologies already provide. “There are applications for cannabis, and it’s a very interesting technology, but it has drawbacks and limitations,” said Jessica Billingsley, CEO of Denver-based seed-to-sale firmMJ Freeway. She added that it “doesn’t replace anything that exists currently.” Does that mean cannabis businesses and investors should avoid putting money into this new technology?The answer may depend on how a company applies blockchain. Verification is Key Advocates say blockchain’s verification feature, coupled with how the blockchain is structured and programmed, makes three of the technology’s most notable features possible: • Every event or transaction can be traced, such as when a grower destroys contaminated product or ships product to a retail client, or when a customer buys cannabis. •The blockchain digital ledger cannot be manipulated or changed. •The data is decentralized, so the tech- nology is much more difficult to hack. While this may seem too good to be true, some marijuana and mainstream businesses already have embraced block- chain technology. For example, the National Associa- tion of Cannabis Businesses (NACB), an advocacy and standards group, has hired a company to develop software that is expected to include blockchain technology designed to give its members – currently numbering about two dozen plant-touching and ancillary firms – with seed-to-sale and transaction-tracking capabilities, among other canna-centric applications.The NACB hopes to roll out the software early next year. A handful of cannabis retailers also have turned to blockchain for payment solutions, including the installation of bitcoin ATMs in stores. Payments, Banking and Financing Some cannabis industry executives see blockchain and cryptocurrencies as poten- tial solutions to the cannabis industry’s September 2018 • Marijuana Business Magazine • 83