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The U.S. cannabis industry is projected to reach $75 billion by 2030, according to Cowen & Co., driven by the legalization of medical and recreational cannabis across a growing number of states. At the same time, Deloitte believes Canada’s cannabis industry will reach C$22.6 billion within five years following the legalization of recreational cannabis on a national level—a move that made it the first G7 nation to address the problem.

In this article, we will take a look at some of the challenges facing consumers, businesses, and regulators within the cannabis industry and how companies like BLOCKStrain Technology Corp. (TSX-V: DNAX) (OTC: BKKSF) aim to address the issues head-on using innovative new technology.

Diversion vs. Inversion Issues

Lawmakers across North America are calling for strict regulatory oversight to prevent diversion—or the transfer of legal cannabis to the black market. Overproduction and high tax rates have encouraged some cultivators in the United States to risk their licenses and sell excess cannabis into the black market to recoup costs or generate excess profits. These activities not only enrich criminal enterprises, but could damage the industry’s credibility.

In Canada regulators have seen producers licensed under the Medical Marijuana Access Regulations abusing their license to produce very small amounts of cannabis, and instead produce massive quantities of cannabis and extracts bound for the black market.

For example, a medical cannabis grow operation was recently shut down near Toronto after it was discovered that personal medical marijuana licenses were being used to grow $6.5 million in illegal plants across 22 industrial greenhouses. These kinds of industrial-scale personal grows have become magnets for theft and violence, with a number of homicides linked to what would normally be considered legal businesses.

Inversion—or the sale of black market product in the legal market—has become an equally concerning problem. Black market product is untested and could contain pesticides, heavy metals, and other contaminants. Consumers that unknowingly purchase black market cannabis could be taking on significant health risks. Over time, these problems could lead to a crisis of confidence in the industry on the part of consumers.

How Seed-to-Sale Tracking Helps

Seed-to-sale tracking solutions can help address both diversion and inversion problems facing the legal cannabis industry. Under these schemes, individual plants are tagged with barcodes or identification tags that are used to track them through the supply chain. The closed-loop system helps prevent diversion from occurring, since regulators can easily check and see whether yields are abnormally low given a certain number of plants.

BLOCKStrain Technology Corp. (TSX-V: DNAX) (OTC: BKKSF) goes one step further with Genome-to-Sale™ tracking powered by an immutable blockchain-powered ledger. By utilizing a genetic based identification system and placing that information into a unique barcode, cannabis consumers, businesses, regulators, and even other software companies can quickly determine everything from potential contamination to the potency of each strain. Strain breeders at Licensed Producers can also ensure their intellectual property is protected when licensing strains.

The company began by partnering with licensed testing facilities and streamlining the lab process to reduce red tape. For each batch of products processed, a blockchain transaction is created, thus becoming a unique identifier that is used throughout the supply chain. Craft growers use the platform to protect the intellectual property of their unique strains, and now, licensed producers like WeedMD Inc. (TSX-V: WMD) have entered the fold…

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