Ron goes to a marijuana dispensary every week to get medicinal cannabis. He uses weed to up his appetite gone with chemotherapy. A doctor told him which products he should look for. “Avoid smoking, try organic concentrates,” he said.
Nancy does the same, but the cannabis-derived medication isn't for her; It’s for her kid who has epilepsy. Another physician recommended she tried treating the toddler with CBD oil. It’s been working wonders.
Both Ron, who’s got a compromised immune system, and Nancy, who’s medicating her son with a cannabis-derived therapeutic, trust their local dispensary; they have to. They believe the employees when they assure the products have been tested, when they say they are organic and pesticide free, when they ensure a particular oil has no THC in it, just CBD, which is crucial for a developing brain like that of Nancy’s child. They trust the budtender’s recommendations. These people are supposed to know their weed.
But, do they really? And have these dispensaries checked every product’s origin and lab results?
A recent survey conducted by HempStaff revealed only 55 percent of dispensary employees have received formal training for their positions. This means that a budtender might not know exactly what’s in each product. Actually, in many cases, nobody in that retail location knows. Maybe the provider faked the lab results, maybe the product hasn’t been tested. There’s no way to know for sure.
At least, this has been the case so far. But now, there’s Paragon, a blockchain solution for the cannabis industry that isn't what you’d expect. Paragon is not so much about payments (although it’s a part of it), but about access to incorruptible information.
“We are treating cannabis as a normal crop. So, the same way that you would want to know where the corn on your table came from, or the apple that you had at lunch came from, you want to know where the weed you’re consuming came from,” Paragon’s founder and CEO Jessica Versteeg, a former Miss Iowa turned cannabis entrepreneur, told Benzinga.
Paragon As Collective Policing
The idea behind Paragon is pretty straightforward: The blockchain registers everything that has happened to a cannabis product, from seed to sale, letting consumers, retailers and the government know where everything came from.
“Was it indoor or outdoor? What kind of light was used? What kind of soil was used? Were earthworms used? Were pesticides used? Or was it cinnamon or cayenne pepper? What was the level of PH in the soil? How much water was used? These are all things people want to know,” Versteeg said.
But there’s more. Paragon also allows consumers to see the real lab results for each product including mold and organic tests, as well as information regarding levels of THC, CBD and other compounds. “You just scan a QR code on the back of the product and get all of the information,” the former Amazing Race participant said.
Paragon can come in very handy not only for consumers and retailers, but also for government agencies and regulations.
Imagine a farmer grows 100 pounds of weed. Since she is an ethical producer, she takes it to the lab to get it tested. The results indicate that 50 percent of that crop has mold, so instead of selling it to a dispensary anyways or taking it to the black market, like some do, she decides to throw it away. However, the government will still tax her for the whole 100 pounds, because there is no way to know if she actually threw that marijuana away.
But, if the lab results and proof that she threw the contaminated weed away end up in the blockchain, the government can know for sure this cannabis is not going to the black market and therefore tax her for just the 50 pounds she could actually sell.
“I think that one of the best ways for cannabis become legal on a federal level is to get the government to feel like we are partnering with them, showing them what we are doing, instead of hiding it,” Versteeg said.
The Crypto Aspect
Blockchain technology is crucial to Paragon in the sense that it allows for an incorruptible ledger. This means that all the information in there is secure and cannot be tampered with. Now, where does the cryptocurrency component of Paragon come in?
Those following the cannabis industry will likely have read, more than once, about how traditional financial institutions are not servicing marijuana-related businesses. On the one hand, large commercial and investment banks like JPMorgan Chase & Co. JPM, Bank of America Corp BAC, Morgan Stanley MS and Citigroup Inc C aren't writing loans for pot businesses. However, this doesn't seem to be such a big problem; the industry seems pretty well funded. In fact, in the first nine months of 2017, more than $1.8 billion came into the space.
What’s really troubling, though, is the limited access to regular, every day banking and payments services. You can’t use your good old Visa Inc V, Mastercard Inc MA or American Express Company AXP cards to pay for weed; not even Paypal Holdings Inc PYPL is servicing the industry. This is what makes the so-called “cash problem” so real and persistent. It’s not about a lack of cash, but about an over-abundance of it instead.
“There’s a large part of this problem we cannot address due to current regulations,” Versteeg said. “For the time being, people cannot buy cannabis in the U.S. using cryptocurrencies because the substance remains federally illegal. In fact, federal law only allows for cash payments.”
So, while business-to-consumer transactions will still be completed mostly in cash, business-to-business dealings will be aided by Paragon. Let’s go into one final hypothetical:
Imagine the same farmer mentioned above has been legally growing cannabis in Colorado for years. Since she’s been obliged to transact only in cash, she is now sitting on a few million dollars, which most banks will not deposit.
This means not only does she have a bunch of cash at home, but she has to pay her lawyers, accountants, drivers and other employees in cash as well. There’s no need to explain why regular, predictable transactions in cash are dangerous and susceptible to disruption.
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Paragon will not only offer a blockchain ledger, but also a cryptocurrency. The presale and initial crowd sale have ended already, and all purchased tokens will be distributed on the Oct. 22. Check out the full white paper on Paragon’s website.
Once in the hands of holders, the digital currency will allow for payments within the cannabis industry, so that all of these people working in it will no longer have to move around with large amounts of cash every week or month.
According to the CEO, the proceeds from the initial coin sale will be used to finish building the blockchain and, mainly, to construct a chain of high-tech ParagonCoin co-working centers in the 29 states where cannabis is legal.
“It’s not for startups that want to sell cannabis products; it’s for cannabis people making things like packaging, but still need to have some cannabis in their hands to test their products, making it hard for them to find people willing to rent out space to them,” Versteeg said.
“I care about the cannabis community … and caring about it means giving it something that can actually help others trust it, feel like it’s a responsible community, and feel safe in this community. It’s so fragmented that we need to bring it together.”
Image Credit: Javier Hasse
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