Digital currencies like bitcoin have been in the media a lot in recent years, and they may provide some relief for cannabusinesses.
Our industry suffers from being a financial pariah, banks don’t want to deal with us because of the risk of losing their federal backing for perceived money laundering. Cryptocurrency may offer a third party solution, but it’s important to know what it is, and what it isn’t.
Cryptocurrency is a form of money limited by the difficulty of certain calculations. New bitcoins, for example, can be generated or ‘mined’ by devoting hours, weeks or months of computer time to crunching numbers on important but difficult calculations. This limits the number of coins, in the same way that a gold-backed currency is limited by the world’s supply of gold.
The most recent innovation in cryptocurrency is the introduction of blockchains. When you buy a soda at a convenience store, you can pay with a card, which will automatically track the transaction, or you can pay with cash, which will not be tracked. A blockchain is automatic tracking for cryptocurrency.
The difference is that with a card, the company which offers the card gets a copy of the information, and they get a slice of every transaction. Blockchain information is decentralized and it contains a record of every transaction it has been used for.
This eliminates the middleman, and allows consumers to pay for things directly, in a way that is transparent and easy to audit. For cannabusinesses, blockchains offer a way around not just card fees, but a non-cash payment method that circumvents banks entirely.
So is the time for cryptocurrency now? Perhaps not. These are still the days of early adoption, and there have been issues with the security of cryptocurrency wallets. Cryptocurrency’s reputation has been further damaged by high-profile hackers using it for secure payment, but together, these technologies offer too much promise to go by the wayside.
If blockchain adoption gains momentum, then paying with your phone will be the new credit card, and the ones who don’t take it will be the outliers. If it doesn’t it will still be an open-source option that will be attractive to many, the way that open-source, free, operating systems like Linux are, as compared to Windows or Apple OS.
Each cannabusiness will have to decide for itself whether it’s worth the risk to try out blockchain payments, and invest in cryptocurrency. However, it may be an apt comparison to consider, that although most consumer computers run Windows or Apple OS, most of the servers belonging to businesses, colleges and governments run Linux.