The Virtual Relationship Between Cannabis and Cryptocurrencies

Cannabis and money have a complicated relationship. Despite the fact they’re both green in color, cannabis companies cannot work with banks because the herb is still considered federally illegal. Even in California’s new legal landscape, canna-businesses face the burden of handling gigantic sums of cash, which isn’t only frustrating to manage; it’s also a public safety issue. Think about it this way: the industry’s estimated to bring in $7 billion—in cash-- in the first year. Let that sink in for a second.

 

One way cannabis companies have dealt with the lack of banking is through cryptocurrencies, or virtual money designed to work as a medium of exchange using cryptography to secure its transactions, to control the creation of additional units, and to verify the transfer of assets. Cryptocurrency also removes banks from the equation, and thus, the government. In other words, a transaction takes place solely between two people, whereas when we transfer money to someone—via Venmo, wire transfers or taking money out of an ATM—the bank is the middleman. Additionally, cryptocurrency is created and held electronically and has no restrictions on what you can purchase, unlike mainstream financial institutions. So the concept of “dirty” or “illegal” money doesn’t exist.

 

The end of 2017 saw the explosion of Bitcoin, launching the underground world of cryptocurrency into the spotlight. The value of one Bitcoin rapidly rose to $10,000 and in less than two weeks hiked to nearly $20,000, catching the attention of the media and luring millions of people to invest in the digital currency in hopes of cashing in. According to the Chicago Tribune, if you purchased $100 of Bitcoin in 2010—a time when the cryptocurrency never topped more than $1—your Bitcoins would be worth $75 million today. As of Feb. 21, 2018, one Bitcoin is valued at $10, 385.72.

 

But cryptocurrency is nothing new to cannabis-folk. Whether purchasing cannabis for self-consumption or moving the plant for business, cryptocurrency’s provided a less traceable means for marijuana transactions to occur. And Bitcoin isn’t the only type of cryptocurrency, either. In fact, there are digital-currency networks designed for the sole purpose of providing financial support to the cannabis sector—I mean, obviously, this is 2018. In no particular order, here’s a list of the seven most popular cryptocurrencies in the new age of marijuana.

 

1) PotCoin:

Launched on Jan. 24, 2014 at 4:20 pm (of course), PotCoin was ahead of the curve by anticipating the cannabis industry’s need for banking. It was created specifically for the legal marijuana industry, particularly Colorado’s canna-world. PotCoin ATM's popped up in a few Colorado dispensaries and at Denver’s 420 Festival in Civic Park. But the cryptocurrency never quite caught on.

 

That is, until, the summer of 2017. A press release and a video of NBA star Dennis Rodman wearing a potcoin.com shirt in North Korea thrust the cryptocurrency into the media spotlight again, causing the value to spike 76 percent in just one day, according to Coinmarketcap.com. Its current market cap is close to $66.7 million, a considerable increase from $81,547 in February 2014. It currently sits at #200 in market cap ranking for crypto.

 

2) Ethereum:

Ethereum is the second most popular platform in the crypto community. It's thus considered Bitcoin’s main rival. Ethereum, however, was created as a “world computer” super-network for the decentralized development of apps, which would (in theory) do away with third-party companies like Google and Apple. To compare to Bitcoin, which eliminates banks (the middleman) from the transaction process, Ethereum eliminates companies (the middle man), like Google and Apple, from the equation. So, Google and Apple are to Ethereum what banks are to Bitcoin.

 

 With Ethereum, thousands of "nodes" run by volunteers from across the globe (thus where the idea of a "world computer" comes in) replace servers and clouds. The vision is that Ethereum would enable people to compete to offer services on top of this infrastructure. For example, scrolling through a typical app store, you’ll find a plethora of downloadable applications. These apps rely on a company (or another third-party service) to store credit card information, purchase history, and other personal data.

 

Third parties also govern the apps presented to you. Apple and Google curate—and, apparently, sometimes censor—which apps you're able to download. In theory, Ethereum combines the control people had over their information in the past with the easy-to-access information we have in the digital age.

 

Knowing that net neutrality is potentially coming down the pipeline, being a part of Ethereum seems like a smart idea. Additionally, most cannabis apps are shunned by both Google and Apple—except Weedmaps, oddly. In Ethereum, cannabis apps are fair play.

 

3) CannabisCoin:

CannabisCoin is another currency that came into existence in 2014, just a few months after Potcoin. CannabisCoin is a proof-of-work, peer-to-peer open source currency, and like Potcoin, was aimed at making transactions for medical marijuana dispensaries easier. Although each coin isn’t nearly as valuable as, say, Potcoin or Bitcoin, what’s interesting about CannabisCoin is what a token yields. Instead of cashing out your coins for money, CannabisCoin converts its currency directly into marijuana. Under the name “CANNdy” there’s a line of medicines and marijuana strains specifically grown to exchange at the rate of one CannabisCoin to one gram of medication. There are 91.8 million CannabisCoins with over 77 million in circulation. The currency has a market cap of $25.8 million.

 

4) HempCoin:

This is another cryptocurrency that came into existence in 2014. But instead of focusing on individuals utilizing it to purchase flower and other canna-products, HempCoin is designed for the farming industry and medical/recreational dispensaries. HempCoin's website claims that the currency can be used to "facilitate transactions between marijuana farmers and the local dispensary shops," and purchasing gear and tools used for farming marijuana.

 

What’s perhaps the most interesting about HempCoin is it’s used in all areas of agriculture—not just the cultivation and retail sectors of the cannabis supply chain. As of Jan. 2018, HempCoin’s priced at 0.55USD, a market cap of more than $127 million. Of all the cryptocurrencies, it’s the 148th largest.

 

5) Ripple:

Ripple is known for its digital payment protocol rather than its cryptocurrency. Ripple operates on an open source and decentralized peer-to-peer platform, allowing for the seamless transfer of money in any form: USD, Yen, Litecoin, Bitcoin, etc. It’s easy to see how Ripple can benefit the cannabis industry, given the fact you can transact with any currency. Money sent on the Ripple network is converted into an XRP token on one end and then back into the currency of choice at the other end.

 

According to numerous forums on Reddit, Ripple is one of the more popular cryptos in Canada. Hydroponic stores across the northern border are now accepting Ripple as a form of currency to purchase lights and grow tents. In other words, cultivators are using Ripple to buy grow lights. As of 2018, Ripple’s overall value is around $52 billion

 

 

6) Litecoin:

Litecoin is a peer-to-peer cryptocurrency that's earned the nickname of "Bitcoin’s little brother.” the most notable differences are Litecoin’s much faster transaction speeds, and 84 million token limit.

 

But Litecoin works similarly to Bitcoin. You use a wallet to store, manage and send coins (or payment) to anyone around the world—as long as they also have a Litecoin wallet. It’s entirely anonymous, ultimately preventing banks or anyone who might be watching from knowing how or where you're spending money.

 

As of 2017, there are seed banks that urge customers to purchase with Litecoin because it’s more secure for both parties. As an incentive, they’re willing to give customers 20 percent off their purchase if they use the cryptocurrency.

 

Litecoin was touted in 2011 as the “silver” to Bitcoin’s “gold” and at the time was the second largest cryptocurrency by market cap. Today, Litecoin’s market cap stands at just over $10 billion.

 

7) Bitcoin:

Last, but certainly not least, is Bitcoin: the cryptocurrency darling. As stated in the intro, Bitcoin is the reason cryptocurrency is even on the radar. Released in 2009 by Satoshi Nakamoto, an anonymous figure no one knows—even to this day to this day his identity remains unknown, the currency is the essence of secretive. In fact, it’s given new life to the term because it not only removes banks from the transaction equation, it also eliminates paper trails.

 

Although started by "Nakamoto," Bitcoin isn’t owned by a single entity or person, unlike mainstream financial institutions. Instead, Bitcoin is maintained by a group of volunteer coders, and run by an open network of dedicated computers spread around the world. This is what attracts individuals and groups to use the currency: it erases the unease people have with the control banks or government institutions have over their money.

 

Bitcoin has the most significant market cap to date around $10billion, overshadowing all other cryptocurrencies combined.