Leveraging Blockchains to Track the Marijuana Supply Chain


With some U.S. states and Canada now legalizing marijuana for recreational use, the need for a reliable way of monitoring the pot supply chain is greater than ever. Can blockchain technology do that effectively?

There's some evidence that distributed databases may be able to track where marijuana is grown and how it gets to suppliers. There's also optimism that it's a solution that can eliminate black market distribution.

According to a new report by Mike Peña , the communications manager at Stanford Technology Ventures Program, blockchains might allow regulators to exercise oversight over the pot supply network and help stem illegal trafficking.

Using existing systems, government watchdogs in California, for example, can only monitor so much. It's estimated by the state's Department of Food and Agriculture "that all but 2.5 million pounds of the 13.5 million pounds of cannabis produced in 2016 left California," Pena's report stated, "a huge amount undoubtedly exported to places where pot is still illegal."

Ideally, digital ledgers would allow interested parties to follow the supply chain of marijuana production from seed sourcing to consumption. That means the ability to see where a product is at any time.

The Golden State legalized recreational pot use earlier this year. Currently, California authorities are using a combination of radio frequency tags and software, but it's not tracking all of the marijuana being shipped.

California's emerging " CalCannabis Track-and-Trace " system, which is not blockchain-based, states that its tracking methods "are not expected to eliminate illegal inversion or diversion of cannabis throughout California's commercial cannabis supply chain, but they will be invaluable auditing tools for the state's cannabis compliance and enforcement staff."

Meanwhile in Canada, where marijuana is also being legalized, a company called Greenstream Technologies , a subsidiary of BLOK Technologies , is also focused on supply chain transparency. Greenstream recently did an alpha launch of a blockchain-based platform for the Canadian cannabis industry. The platform is built on an open-source Hyperledger stack.

BLOK is a public Vancouver-based company that invests in and develops emerging startups in the blockchain sector. Greenstream states that its cannabis platform "seamlessly ensures supply chain data integrity, incorporates a cost-effective and legal payment gateway for the exchange of value and includes an identity verification system."

Ideally, Canadian and other cannabis regulators will be able to watch pot transactions as they happen.

It "will enable real-time oversight of the entire cannabis supply chain - capturing the complete history of transactions in perpetuity on the platform for anyone with permission to see," Peña noted.

Since a blockchain is a trust-based system and entries into a distributed database can't be altered, it's hoped that it will provide a more reliable and transparent way of tracking pot production and distribution. It also might help governments maintain and improve quality control.

In a report written by IBM last year for the province of British Columbia (BC), the computer giant stated that "blockchain [technology] is an ideal mechanism in which BC can transparently capture the history of cannabis through the entire supply chain, ultimately ensuring consumer safety while exerting regulatory control - from seed to sale."

IBM proposed tracking pot sales late last year. Blockchain technology could allow stakeholders to "take control of sourcing, selling and pricing of products while allowing producers to track inventory, supply and demand projections and consumption trends," IBM stated in its paper for British Columbia.

The company has been promoting blockchain adoption for large enterprise clients. Its suggested applications range from logistics to consumer retail.

Will blockchain applications provide a foolproof solution for regulators monitoring pot commerce who also hope to curtail the black market? It's unlikely to be a catchall, but the technology is sure to provide more illumination of the path cannabis travels from the field to the consumer.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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