Bitcoin for Cannabis Businesses: A New Currency for a New Industry
Cannabis businesses and financial institutions generally mix like oil and water; in other words, they don’t. Instead of relying on cash, however, some members of the burgeoning weed industry have turned to Bitcoin to securely store their money.
The cannabis industry has been in full swing for nearly 20 years and has proven to be one of the biggest burgeoning industries in the world today. Despite the vast number of cannabis-related businesses popping up, however, dispensary owners still cannot utilize traditional financial systems. Federal law frightens most banks away from dealing with them.
Currently, when you walk into a dispensary, you will probably find an ATM and have to pay cash. This is because under federal law, dispensaries cannot accept legally credit or debit cards. There are a few dispensaries out there that use loopholes to accept debit cards as though the business itself were an ATM, but this is a quick fix.
Some dispensaries open accounts under a more legal alias, but forcing Jimmy’s Pot Shop to open bank accounts in the name of Jimmy’s Shirt Shack just to offer the standard convenience of a pin-debit machine is just as wrong as the act itself. Still, opting to run an all-cash business opens up the danger of theft or robbery—not to mention tax evasion and cooking the books.
These roadblocks have driven pot business owners to get creative with their finances and seek alternative methods of accepting and storing money to solve their cash woes. Bitcoin is one of these solutions. Bitcoin is a completely decentralized digital currency, otherwise known as a cryptocurrency.
That means anyone can buy, sell, and use Bitcoin anywhere in the world. All Bitcoin transactions post immediately—not days or weeks later—to one’s digital wallet and are fully confirmed by the network within around 10 minutes.
Bitcoin operates on an open-source, distributed ledger known as the blockchain. This simple concept creates additional layers of transparency and digital security for its users. In a nutshell, when you purchase something with Bitcoin, the transaction is recorded onto a digital block.
Each block is one small link in a chain of connected blocks—that is, the blockchain. When the transaction is confirmed, it is recorded by computers around the world that all store identical copies of the blockchain. The individuals who operate equipment and record transactions on the network are called miners.
In a traditional computer network, documents can be taken, altered, or switched with fraudulent replacements if one server is hacked. This isn’t the case with a blockchain. Once a transaction has been recorded into a block, it is synchronized with a vast network, making alteration or removal of the data impossible. The same goes for the digital wallet that holds your Bitcoin; hacking or theft is nearly impossible.
Still, for many years, there was much concern for Bitcoin’s longevity and stability whenever it was thrown into the cannabis discussion. Those were valid concerns; after all, why accept a currency that may be worth half as much the next day? Also, why trust a technology that pretty much came out of nowhere?
Sure, no one knows much about the origin of Bitcoin or Satoshi Nakamoto, its creator or group of creators, but there is no denying the technology has grown rapidly since its inception in 2008. Since 2014, it increased in value from just over $200 per coin to over $700.
Some mainstream news organizations even post its daily value alongside gold and oil, if that tells you anything about its importance in a changing global market. Also, Russia, Poland, China, Japan, and a consortium of western European nations are actively researching Bitcoin’s underlying blockchain technologies. These gains in popularity and rises in value are what make Bitcoin a stable alternative to traditional financial systems.
It is hard to say what will happen with Bitcoin a decade from now, but the analysts can predict the next few years. With governments seriously looking at blockchain technology, Bitcoin has never been in a more likely position to excel.
You are sure to see acceptance in local markets sooner than you might think. Companies like Paypal and Amazon are already accepting Bitcoin, and more are adding it as a payment option every day.
If cannabis companies started to accept Bitcoin now, they would see a growth in value greater than any interest rate a bank or credit union could ever offer. Analysts see Bitcoin peaking at over $2,000 per coin by 2020, making it a rock-solid way to get out of the cash-only game.
While it has yet to be accepted as a standard, Bitcoin is already starting to work its way into the cannabis industry. There are a handful of dispensaries in Colorado and Washington that accept Bitcoin in lieu of credit and debit cards, and there are several online seed and delivery services that offer discounts for paying with Bitcoin.
Besides being accepted as a currency, the Bitcoin blockchain is also now home to a database of cannabis genome sequencing. Called Kannapedia, the database was created by the cannabis testing laboratory Medicinal Genomics.
It is the first database of its type to be stored on the same blockchain technology that registers all Bitcoin transactions. Again, this safeguards the information from hackers and preserves the integrity of the data.
With blockchain technologies continuing to be the focus of the tech world, you will undoubtedly see an increased integration of cannabis and digital currencies in the very near future.
Besides the ease of use, it provides an immutable database of transactions impervious to fraud that will allow businesses to keep more accurate records of inventory, money, and other sensitive data.
This will ensure transparency in cannabis businesses, which could help bring legitimacy to an industry that is still viewed with a half-cocked eye by many.