(Bloomberg) -- Cannabis and blockchain often draw comparisons for the wild volatility they bring to markets, but one company is attempting to show that a combination of the two can provide a measure of stability for consumers.
Vancouver-based Blockstrain Technology Corp. uses blockchain to verify cannabis genetics and assure consumers that they're getting what they think they're getting. The Canadian company announced its first foray into the U.S. Tuesday, signing a letter of intent with Los Angeles-based NXT Water LLC to develop and launch Akeso Functional Fitness Water, a CBD-infused drink that markets itself as the “first-ever fully transparent beverage.”
CBD, which stands for cannabidiol, is burgeoning in popularity after the U.S. farm bill legalized a hemp-derived version of the non-intoxicating extract last month. But the U.S. CBD market has been overrun with low-quality products from unverifiable sources, according to Blockstrain Chief Executive Officer Robert Galarza.
“The joke is that CBD stands for ‘could be dishwater,'” Galarza said in a phone interview.
Blockstrain uses blockchain -- the digital ledger used for verifying and recording transactions that's best known for underpinning Bitcoin -- to track cannabis from harvest to purchase. It uses a third-party firm to validate the strain's genetics and links it to a QR code so the buyer can verify the strain, the mixture of CBD and THC, and other key details of their purchase.
The goal is to build “trust and transparency” in an industry that's been dominated for most of the past century by the black market, Galarza said.
In Canada, Blockstrain has partnered with cannabis producer WeedMD Inc. to test and verify its strains. Blockstrain is still a penny stock, with a market value of just C$15.6 million ($12 million) and no revenue. Galarza said it has a “lineup” of other Canadian firms that intend to use its product, and sees big potential in the newly legal U.S. CBD market.
“Discerning consumers will pay a premium to know what they're getting,” he said.
To contact the reporter on this story: Kristine Owram in Toronto at kowram@bloomberg.net
To contact the editors responsible for this story: Courtney Dentch at cdentch1@bloomberg.net, David Scanlan
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