Danny J. C.
High Times For Crypto
The emergence of new technologies is disrupting industries, jobs, work-processes, entrepreneurship, ie the Sharing Economy. Thanks to the internet many new technologies are growing exponentially. Unlike other technologies, blockchain comes with unique opportunities. It is not just a great technology that allows better security, transparency, and trust, but it also changes the way we think about storing and transacting assets, and their real value.
Blockchain is an open decentralized database – a distributed ledger. Every participant on the network has a copy of the transaction ledger. Ledger entries are secured by strong cryptography and each transaction must be agreed by the most of the participants in order to make it into the ledger. This type of decentralized database allows for the programming of smart contracts, essentially complex conditional statement that allow the network to react to predetermined inputs in an autonomous nature without the need for human intervention. The parameters that govern this type of network, will determine the degree to which information is publicly accessible. Now we can store any value information like money, goods, property, work, or even votes without the need of a central authority to verify or prove it.
"Tokenization Democratizes Capital Markets and Transforms Traditional Financing" Eike Schramm (COO, Mooonwhale Ventures).
Security Token allow fractional ownership of assets, which leads to smaller requirement of investment amounts. Additionally, low fee structures apply, as regulatory compliance is incorporated on the blockchain and allows for automated processes (e.g. dividend events). Furthermore, token can be traded on secondary markets, providing much better liquidity to investors.
Blockchain technology can help cannabis companies meet regulatory requirements by offering immutable records showing the source of each plant in a harvest, where it is processed, how it is shipped and where it is distributed. Additionally, the cannabis industry can flourish and expand through new payment and funding methods Blockchain enables.
Cannabis is an undervalued opportunity. Legal cannabis is a fast-growing global industry. Another truly disruptive emergence, impacting everything from medical application, recreational purpose, beverage production to home construction. The market capitalization of the top 10 companies in the alcohol industry in 2017 were roughly $1.6 trillion. The top 10 cannabis companies had a $48 billion market capitalization in 2017. Global spending on legal cannabis is expected to grow 230% to $32 billion in 2022 as compared to $9.5 in 2017, according to Arcview Market Research and BDS Analytics. The cannabis industry is in the midst of exponential growth; VC fundraising is at an all-time high with businesses estimated to collect over $8 billion by the year-end, with potential grow over 200% by 2020.
Marijuana is a literally 'ever-growing' industry. Nevertheless, some credit card businesses and banks are denying to provide services to many involved companies, which has given alternative systems a great chance to prove themselves. Blockchain tech and crypto related startups exploring the opportunities with products such as a Bitcoin ATM and cryptocurrency point of sales development with a payment solution for Marijuana dispensaries, or infrastructure solutions provider for automating the marijuana supply chain through smart contracts, triggering product recall for the safety of consumers, and integrating licensed industry players.
“IBM suggests blockchain is an ideal mechanism in which British Colombia can transparently capture the history of cannabis through the entire supply chain, ultimately ensuring consumer safety while exerting regulatory control – from seed to sale,”
Cannabis in Medicine
Researchers are increasingly studying chemicals found within cannabis — cannabinoids (CBD) and tetrahydrocannabinol (THC) — to discover new medical applications. CBD is used to help with other various conditions, such as seizures, inflammation, nausea, migraines, depression and anxiety. THC is used to help with conditions such as pain, muscle spasticity, glaucoma, insomnia, low appetite and anxiety. In June 2018, the U.S. Food and Drug Administration approved Epidiolex, the first prescription medication to contain CBD. It’s used to treat rare, difficult-to-control forms of epilepsy.
With the legalization of medical marijuana, the pharmaceutical industry is likely to take a big hit — to the tune of nearly $4B per year, according to one study by the University of Georgia. Hence, many pharmaceutical companies will incorporate cannabis into their strategies. GW Pharmaceutical, a global leader in developing cannabinoid-based medicines, recently made history when it received FDA approval of its marijuana plant-based prescription drug, dubbed Epidiolex.
Wellness & beauty
Cannabis applications across the wellness and beauty sector are rapidly emerging. For example CBD oil, a non-psychoactive treatment offering relief from pain, anxiety, and depression. It also possesses anti-inflammatory and anti-acne properties. It’s also making its way across beauty & makeup, including mascara and lip balms.
Packaging for cannabis products is highly regulated, with requirements for child-resistant and resealable lids, tamper-proofing, and opacity. This has led to new companies flooding the market to meet the specific demands of the industry.
Smaller, localized banks and credit unions started to serve legal cannabis companies an alternative to dealing in straight cash (or the dealings with larger financial institutions). More than 400 local banks and credit unions have marijuana-related clients, a number that has more than tripled since 2014.
Alternatively, cryptocurrency and smart-contracts offer a new way to process low-fee and instant payments, cross-border payments, and more efficient transactions between cannabis consumers and retailers. Security Token and Blockchain technology now enable fundraising for business expansion or new startups, for virtually everyone.
Several projects are emerging, some useful and profitable, others - well... you know to issue your own token takes less than 20min...
Hemp requires half as much land as cotton to produce a ton of finished textile. Subsequently, it’s changing the landscape of the agricultural industry. Hemp can be woven into light materials for clothing, durable textiles for commercial industrial purposes, and even very strong ropes and cables for heavy lifting and pulling. Unlike cotton, hemp holds its strength when wet, and it also possesses antibacterial properties.
For the multi-billion dollar legal marijuana industry, which currently deals in mostly cash & in-person business, e-commerce is the next frontier for retailers. Companies are flooding the space with new e-commerce solutions specifically aimed at supporting the cannabis industry. E-commerce provides an avenue for cannabis retailers and shoppers alike to transact on a digital platform, allowing businesses to scale faster and more efficiently.
The food industry has seen cannabis edibles like cannabis-infused oil, snacks, chocolate and drinks, take off over the last decade. Consumers in California purchased $180M worth of cannabis-infused food and drinks last year.
Alcohol consumption is declining globally. In response, beer, wine, and spirits companies are looking to expand their offerings, including through cannabis-based beverages.
UK-based spirits maker Diageo, has been holding discussions with at least three Canadian cannabis producers about a possible deal for a cannabis-based beverages and infused drinks, according to a BNN Bloomberg TV report. Or, AB InBev, the world’s leading brewer, and Tilray, a global pioneer in cannabis production and distribution, announced a partnership to research non-alcohol beverages containing tetrahydrocannabinol (THC) and cannabidiol (CBD).
Perhaps no industry is more affected by the legalization of marijuana than the tobacco industry. Similar to alcohol companies, tobacco brands could pivot to increasingly incorporate cannabis in their products.
Philip Morris Product SA , the Switzerland-based subsidiary of cigarette and tobacco manufacturing company PMI, holds a patent for improving GMO systems for growing marijuana.
Textiles & fashion
With consumers willing to spend 20% more for eco-friendly products, big retailers and niche fashion brands are banking on hemp to increase their bottom line. Hemp often scores points for its durability and rapid growth without excessive use of water and pesticides. With the increased legalization of cannabis, fashion brands could take advantage of the largely unbranded space to spark mainstream acceptance of cannabis.
While plastic is extremely versatile and relatively inexpensive, much of it isn’t biodegradable, posing an ongoing threat to the environment. Hemp could provide an alternative and more eco-friendly alternative to plastic, impacting manufacturing of everything from bottles to household appliances to toys, and more.
Biodiesel & energy
Hemp thrives even in poor land and requires minimal inputs, and still produces nearly four times as much oil per acre as soybeans, which is currently the only crop grown on a large scale for biodiesel. Researchers at UConn have found that industrial hemp has properties that make it viable and even attractive as a raw material for producing biodiesel. Using hemp as a fuel/energy source could also greatly reduce the levels of carbon produced by more standardized fossil fuels.
The world consumes around 400M tons of paper every year, using an average of 17 trees to produce each ton. However, an acre of industrial hemp produces quadruple the paper that one acre of trees can. Hemp could help sustainability efforts geared towards reducing deforestation.
Hempcrete is a lightweight, cementitious material made with industrial hemp hurds (woody fibers from the plant core), lime, and water. Hempcrete may come in modular blocks similar to concrete masonry units. And it has the potential to shake the building material industry at its foundation. The first modern hemp-residence was built in 2010, and some 50 houses now exist in the US.
These use case show the enormous potential legalizing's cannabis at scale could bring for many industries and our society as whole. However, as cryptocurrency, regulatory frameworks and adoption are key-drivers for industry and commerce.
Adoption of cannabis products, unlike in cryptocurrency, is preconceived over years in rather negative sentiment. Hence, to create lasting, sustainable competitive advantage and to possibly tap into a trillion dollar industry, companies have to emphasize advantages and use-cases over traditional products, and drive a shift from 'getting high' to recreational and healthy benefits perception.
A society in transition, an industry poised for growth
Cannabis legalization is not exclusive to North America or Canada. A great visual world-map indicating legal/ illegal status of cannabis in Europe, the Americas and Australasia can be found here.
In Canada, interested businesses must obtain the license from Health Canada and comply with the Cannabis Tracking and Licensing System. A full guide can be found here. Most recently Canada became second country to legalize recreational cannabis.
In California, US, any cannabis-business owner must follow 5 steps to acquire a commercial cannabis business license:
1. Submit an Annual License Application
When a business submits an annual license application, the respective licensing authority will provide the applicant with a confirmation notice. This notice will include instructions on how to register for the CCTT Account Manager New Business System Training, which is needed for the following steps.
2. Register and Complete CCTT-METRC
The selected account manager for your business must register for the CCTT Account manager New Business System Training. Upon completion of this training, and once an annual license has been issued, the account manager will be credentialed to access the CCTT-Metrc system.
3. Request Plant and/or Package UID Tags
Once a business has been granted access to the CCTT-Metrc system, the account manager will use the CCTT-Metrc system to request UID tags.
4. Document Physical Receipt of Request UID Tags
Upon receiving UID tags, the business must confirm receipt in the CCTT-Metrc System. UID tags must be documented as “received” before they can be assigned to cannabis plants or products in the CCTT-Metrc system.
5. Assign and Apply UID Tags to Cannabis Products
Temporary licensees who are in physical possession of commercial cannabis plants or products at the time their annual licenses are issued will need to assign and apply UID tags to all commercial cannabis plants and products physically located on the licensed premises.
Schedule 1 is the highest drug schedule of the DEA and categorizes cannabis with LSD and heroin. For now, most top US operators still like this restriction. Large public companies face too much headline risk to get involved in the US. On the other hand, the activists who led the industry through its initial stages don’t have the skills to grow companies. This creates an opportunity for well-formed teams with a strong thesis and the right investors to enter the space, build barriers to entry, gain competitive advantage, and create cash flow.
Marijuana sales grew in 2018 (from $5.8billion in 2017 to $9.3 billion in 2018) and are projected to continue growing in 2019 (up to $13.5 billion). In 2022, it could reach 'highs' up to $24.3 billion.
Blockchain as technology supporting transparency, traceability and secure payment methods, will enhance the growth of the medical and recreational cannabis industry. The possibility for small investors to fuel existing business expand, and startups to flourish, through investment opportunities in Security Token is imminent.
Sources: BioTrack, Marijuana Business Daily, NCV Media, Cannabiz Media, Techvibes, Investopedia, NewsBTC, Healthline Media, Deloitte, CB Insights, FDA