The legal marijuana market is one of the fastest growing industries in the world. According to the 2016 report released by New Frontier and ArcView Market Research, “2015 was a watershed year.” Legal sales of the coveted plant were US$5 billion in 2015, and they will grow 25% this year to reach $6.7b. The report projects that the legal market will be worth a whopping US $22b by the year 2020.
It’s no wonder that entrepreneurs such as Michael Wagner, co-founder of the Cannabis Revolution, is staking a claim in the industry. The Cannabis Revolution is designed to be a fully legal and compliant medical marijuana establishment (MME) business, based in Nevada. It will focus on cultivation, production and dispensary options.
MME 11 Dec 2016
In order to raise funds for the operation, Wagner has introduced a digital currency, TOKES, which will be the backbone of a TOKES platform. “The development and innovation in this space has been incredibly impressive, and a platform we felt could build on,” Wagner told BNC. “We’re coupling that with our passion and enthusiasm for the rapidly evolving cannabis industry, and identified some natural synergies between the two opportunities.”
The currency will be integral to the physical operations of Cannabis Revolution, providing a safer means of transacting. Wagner states that a digital currency could alleviate some of the strain found in the legal marijuana market: “Through our research into the cannabis industry, we knew there was a very serious challenge the operators were dealing with in that all sales had to be transacted in physical cash, due to the tenuous federal legality of the business.”
Legal marijuana is generally sold from dispensaries, also known as pot clubs. A variety of THC products are available to those who are legally allowed to purchase under state law. However, due to the federal illegality, many businesses are unable open bank accounts, and are forced to operate as cash only businesses.
As a result, dispensaries resort to locking away large amounts of cash onsite in safes, and become prime targets for criminals. In November 2016, a security guard was shot in South Los Angeles during a dispensary robbery. In October 2016, a Vancouver dispensary surveillance system caught a robbery occurring at gunpoint.
“Though Bitcoin is intriguing, it does not make much sense for marijuana businesses.”
– Robert McVay, Harris Moure Partner
Using digital currencies as a solution for cash heavy marijuana businesses is not a new idea. In January 2014, a Colorado dispensary looked to bitcoin as a solution. Customers who are already aware and educated about bitcoin can certainly purchase marijuana on the illusive dark market, from online head shops such as McChronalds, and use bitcoin debit cards at dispensaries. However, it’s the untapped market of those who have minimal, if any exposure to cryptocurrency which are of interest.
“While we agree that bitcoin could potentially be a solution, the real challenge is that there are no bitcoin advocates altruistically pushing for its adoption with these business owners,” Wagner explains.
Wagner expects the TOKES platform to overcome the adoption hurdles that bitcoin faces. It will be a fully integrated with Cannabis Revolution, yet a separate organization, and is intended to operate as a not-for profit entity.
“As advocates for the cryptocurrency ecosystem, we felt it was important to give back to the community by improving overall awareness and development digital currency and related technology projects.”
– Michael Wagner, Cannabis Revolution Co-Founder
Wagner describes a focus on educational efforts, technical support and providing a hardware infrastructure for their partners at a commercial level. The platform will eventually offer features such as product and dispensary reviews, dispensary locators, and information dedicated to available strains.
There are also key features of the digital currency powering the platform noted by Cannabis Revolution. Asset pegging, a concept that was introduced by companies such as Tether ties the value of the token to an underlying asset. “This feature provides businesses with the peace of mind that volatility in the underlying token will not impact the bottom line financials. We believe this will result in much higher adoption rates,” states Cannabis Revolution.
Anonymity is also highlighted, and advantageous in a market which is heavily burdened by federal regulation. “This feature requires little explanation or justification,” sates the Cannabis Revolution site.
“As an industry on the cutting edge of the legal system, many participants desire anonymity with their purchases. We intend to have this advantageous system built directly into our transactions layer.”
– Cannabis Revolution
According to James Thorburn, attorney at Thorburn Walker LLC in Colorado, businesses handling cannabis will be subject to audits in the future, due to its inherent cash heavy nature. However, future auditing and the anonymity of the TOKES digital currency is of no concern to Wagner.
“The obscurity of anonymity is largely targeted to those who you wish to prevent from seeing said transactions. However, as a derivative of blockchain technology, the accounting of incoming and outgoing transactions will still be available for internal audits should the business need to present that information,” states the co-founder.
The digital currency also takes advantage of WAVES, a custom tokens platform, that will enable Cannabis Revolution and its clients to track transactions for auditing purposes. Wagner says that WAVES has been supportive of their efforts to undertake this project and have served in an advisory capacity.
“The numerous features that Waves is proposing to incorporate into their platform is appealing to us,” states the co-founder. “In particular, fiat gateways can help facilitate the types of transactions into and out of fiat cash that will be necessary for any merchant and customer utilizing our token.”
Cannabis Revolution recently launched its token in an Initial Coin Offering (ICO), to raise funds for the physical operations project and its TOKES platform. According to Wagner, it has started successfully and the company has seen significant interest from numerous parties both in the cryptocurrency ecosystem, as well as cannabis industry participants.
“Less than a week into the ICO, we’ve seen approximately 50 individual investors, and raised a little over $50,000.”
Cannabis Revolution is now redefining its fundraising goals, as many people are interested in the capital requirements, while the current funds will ensure basic product development and the launch of a mobile app.
The ultimate goal is raising US $5m for a fully-fledged cannabis facility with grow operation, a dispensary, a mobile application with native environment coding, and full hardware infrastructure support for merchant partners.