Bitcoin ‘Too Slow’ for Cannabis Industry Until Block Size Changes
Bitcoinist spoke with CSO and Founder Kevin McKernan, whose company Medicinal Genomics has successfully put cannabis strains on the Bitcoin Blockchain. He explains how strains are actually traced, why his company chose Bitcoin, and why he believes Bitcoin is currently “too slow” if not “useless” for cannabis dispensaries as a currency.
Kevin McKernan: ‘Bitcoin is a Battery of Trust’
Bitcoinist: First, how do you actually put “strains on the Bitcoin blockchain”?
Kevin McKernan (KM): We take the sequence files (VCF or variant call format) and run SHASUM on the files to generate a SHA-256 hash digest of the data. This output is spent in a bitcoin transaction using tools like Proof of existence. com. The Strain gets its own page on Kannapedia that has links to the blockchain transaction ID and the SHA-SUM of the VCF file.
The customers can and should download the sequence files (VCF file) to decentralize the data from our hosting. They then have the DNA Fingerprint file (VCF). As a result, if MGC were ever shut down or acquired the community could recapitulate the database by pooling all of the samples together and use the blockchain timestamps to sort out the timestamps of proof of existence.
Bitcoinist: How many strains have you already logged into the blockchain? Can anybody access this data?
KM: We have sequenced over 1,400 strains. About 1/3rd of those are on Kannapedia. I believe everything on Kannapedia has a blockchain transaction ID as those customers opted to put it public.
[E.g. Cannabis strain called “The Fork” at Kannapedia]
Bitcoinist: How does this help your business compared to conventional tracking methods? How does this method ensure strain consistency, safety?
KM: We live in a digital age where information can be infinitely replicated and counterfeiting is as easy as copy and paste. Trademark law and Copyright law are traditionally used to protect from this but are not compatible with Cannabis and even when they become compatible they are a carbon copy era idea that is obsolete in light of distributed ledgers like Bitcoin. They are far more expensive to utilize as well.
Blockchains bring trust in labeling and product differentiation as the labels can be verified as legit at the point of sale with a smart phone.
Blockchains can provide proof of prior business use to thwart off patent trolls. Multiple cannabis patents have been issued and many are concerned that the patents don’t look novel in light of the genetics that have been circulating for 30 years but there is no notarized prior art to shoot them down. This is where blockchains come into play and the Prior use exemptions in plant patent law become very important to understand.
Outside of defensive IP utility, they have marketing utility. Cannabis dispensaries have 20 different strains all priced at $12/gram. There is no differentiation because no one believes in the labeling system. Compare this to alcohol and you can have $5 bottles of wine and $500 bottles of wine because the labeling is trusted. The highest alcohol liquor doesn’t steal the show because the mature alcohol industry has differentiated on brand and flavor over alcohol or THC content. Blockchains bring trust in labeling and product differentiation as the labels can be verified as legit at the point of sale with a smartphone.
Manufacturing consistency is another application for blockstraining. Take for example the celebrity branding of cannabis. These celebs want cannabis that can sell nationwide but can’t ship it state to state. They have to manufacture it in each state under different brick and mortar grows. How do they maintain consistency? Genetics. We can confirm all distant grows are growing similar genetics and this can be complimented with Terpene and cannabinoid testing.
Bitcoin is a battery of trust.
Bitcoinist: Why did you choose the Bitcoin blockchain? What are your thoughts on cannabis-specific coins such as PotCoin?
KM: Bitcoin is a battery of trust and being the largest and most robust blockchain it is the only blockchain we can put our customers IP on. I am not well read on PotCoin but at 1st glance, it doesn’t seem differentiated from BTC other than its cool name and we need the highest market cap coin to ensure customers trust in the distributed ledger. $15B market cap means BTC has a $15B hack bounty and appears resistant to it. This is a monument of trust that sells.
Bitcoinist: Is your company only focusing on medicinal cannabis? Are you looking to work with recreational cannabis businesses as more states legalize?
KM: We work with DNA. DNA doesn’t differentiate medicinal from recreational and most good physicians will highlight the need for the latter to avoid the former.
Bitcoinist: How many growers are you currently working with? What has the feedback been like?
KM: Kannapedia is best the place to collect this intel. All of the folks up there have agreed to be public and we can’t disclose those who have not. Feedback has been exciting. Kannapedia has terpene and cannabinoid content on it. This brings the genotype-phenotype connection into the picture.
Others in this space are logging customers data into government databases that have a history of being defunded and going dark.
Bitcoinist: Are there any concerns about existing or looming cryptocurrency regulations? Have you been in contact with the authorities?
KM: We don’t use Cryptocurrencies for monetary activity. We just use it for recording timestamps in a disaster-proof or “change of bizplan” proof database.
Others in this space are logging customers data into government databases that have a history of being defunded and going dark. We don’t think that’s a wise plan considering the history of unpredictable government regulation in the cannabis space.
Bitcoinist: Besides data tracking, have you considered accepting BTC as payment?
KM: We have BTC addresses for charitable contributions to research. These are generally spent on better reference genomes and cannabis safety. We are looking into bringing it online for payments and how to do that in a compliant fashion if our company ever went public. Our work tends to take credit cards that are AML-KYC compliant and are often from 3rd party testing labs as opposed to growers. Taking BTC might actually increase that AML-KYC burden.
It’s too slow. Until the block size changes, BTC is useless for legitimate monetary exchange in the cannabis field.
Bitcoinist: Do you think cryptocurrency can help the nascent legal cannabis industry in the US overcome its banking and cash transport problems?
KM: I think there needs to be a circular economy to make this happen. If large garden stores start accepting BTC, then growers can spend their BTC and won’t be turned off by BTC currently slow transaction time and expensive fees. BTC is currently broken for the dispensary end of the transaction as the blocks are full and the transaction fees high. It’s too slow. Until the block size changes, BTC is useless for legitimate monetary exchange in the cannabis field.
There is an argument to be had for the regulators that BTC is preferred over Cash as it’s traceable and more accountable and the regulators understand this. Katheryn Haun (prosecutor that put away the corrupt DEA agents in the Silk Road trial) understands this and is very supportive of BTC for digital medical records to decentralize the honey pots getting hacked at hospitals.
Bitcoinist: In 2016, voters overwhelmingly supported further legalization of cannabis in even more states. Have we hit the watershed moment? When will cannabis be legal nationwide?
KM: With Mexico and Canada going legal while the UN urges dissolution of the drug treaties, the land of the free will be an obvious and unsustainable prison camp. Never has there been more public resentment for the insanity of federal law. That is an enormous risk for any politician in this age of digital transparency.
Medical records need to be decentralized and placed in the hands of the patients via the blockchain.
Bitcoinist: You’ve probably talked with dozens of industry insiders. Is Bitcoin actually making inroads into the cannabis industry? What other use-cases and/or crypto-cannabis businesses are you most excited about?
KM: Medical records need to be decentralized and placed in the hands of the patients via the blockchain. The Courtagen side of our business is building human genomic assays that can address drug-drug interactions with p450 cytochromes, SNPs related to pain and opiate abuse and cannabis dependence risks. Tests like these will provide physicians and patients with information regarding addiction risks and schizophrenic induction risk for pain medications.
This should provide physicians with the personalized information and confidence in migrating patients off a dangerous FDA approved opioids to a safer cannabinoid-based alternative (not all cannabis is safe due to microbial and pesticidal contaminations).
This data can’t reside in centralized hospital databases that have HIPAA penalties of $50,000 per breach. These fines incentivize hackers to hold hospitals ransom for their data once a breach occurs. If this data was in the hands of the true owners of the data (the patients), it would be infinitely harder to hack. The field of cannabinoids is lacking trust and blockchains deliver it in a multitude of ways.
Will Bitcoin have a use-case other than currency for the cannabis industry? Lets us know in the comments below!
Images courtesy of Shutterstock, medicinalgenomics.com, kannapedia.net