What Happens When Marijuana and Cryptocurrency Collide?
This is individual research and does not constitute investment advice.
“Suppose you could make money trading harvested baby brains. Would you do it?”
That’s the question Berkshire Hathaway’s (NYSE: BRK) outspoken vice chairman Charlie Munger asked.
To him, bitcoin is just as bad.
Munger and Warren Buffett set the Twittersphere afire with their poo-pooing of bitcoin and cryptocurrencies at Berkshire’s recent annual shareholder meeting. But Munger did admit that blockchain (the computer science behind bitcoin) “is a great triumph of the human mind.”
I agree with him there.
But today I’m talking about what could be the most controversial investment opportunity in history… an opportunity formed by the colliding worlds of cryptocurrencies and marijuana.
The two are made for each other.
And the potential upside could be enormous.
In simplest terms, blockchain is just a digital, open public ledger that’s decentralized. Everyone can see it. But no one can hack it… yet.
Because all cryptocurrencies are encrypted, processing a transaction requires solving a math problem. The more transactions there are, the more complicated the problems become.
Voila! Those are your blocks in this ever-growing chain of records and transactions.
Blockchain will do for money what the internet has done for data.
During the dot-com collapse, Pets.com, DrKoop.com, eToys.com, GeoCities.com and Flooz.com didn’t survive… but the internet did.
They weren’t bad ideas. They were just a little too early.
Think about it: In 2001, no one wanted to get health content from a website founded by former Surgeon General C. Everett Koop, but today everyone uses WebMD to self-diagnose.
And even though consumers thought Flooz’s online currency was stupid in 2001, there’s now a whole industry built on digital currencies.
So is there some euphoria in the cryptocurrency space? Most definitely. And not all cryptocurrencies will survive. That’s capitalism.
But as was the case with the internet, blockchain is here to stay.
You can use it for title ownership, real estate, contracts, voting and decentralized cloud storage. Plus, if you can get everyone to agree on a standardization, you can use it in shipping.
Blockchain even has a home in the marijuana market.
It can enable peer-to-peer transactions and smart contracts.
But one of the largest opportunities for the marijuana industry could be in seed-to-sale tracking.
This is a requirement in the U.S. and everywhere else that allows legal marijuana sales – medicinal or recreational.
For now, this is accomplished with radio-frequency identification chips.
But in Colorado this year, the state Senate introduced a bill to use blockchain to track pot in the state. The idea is that law enforcement can quickly distinguish between legal medical weed, recreational weed or hemp, versus something from the gray or black market.
And in Canada, even fuddy-duddy “Big Blue” IBM (NYSE: IBM) has made a similar pitch for a national blockchain registry and tracking system.
As IBM stated, “Blockchain is the ideal mechanism… to capture the entire history of cannabis throughout the supply chain.”
And this is an area where several companies are currently innovating. They’re bridging the pot and crypto markets. That means there’s a lot of potential for them to grow very quickly.
Seed-to-sale tracking is just one enticing aspect.
Ongoing hearings in D.C. are deciding the fate of cryptocurrencies and blockchain. This is a very exciting moment for the industry.
But the future is even brighter… especially as two explosive industries – marijuana and crypto – combine.
Maybe you’re like Munger and believe bitcoin is “worthless, artificial gold.” But if so, be like him on the other side too – and recognize that a tremendously useful tool has been forged.
I predict it will eventually become a part of every industry… as the internet did.