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The back pain was killing him – clearly, the time had come to seek treatment. But instead of prescription drugs, Todd Guillion opted for medical marijuana. Why not? The Orange County, California native figured it had to be safer than pharmaceuticals. But shortly after beginning his cannabis regimen, he began suffering terrible numbness in his arms, hands and feet. Mentioned in today”s commentary includes: Innovative Industrial Properties (NYSE: IIRP), AbbVie Inc (NYSE:ABBV), Zynerba Pharmaceuticals (NASDAQ: ZYNE), Insys Therapeutics (NASDAQ: INSY), Compass Diversified Holdings (NYSE: CODI).

Had the legal weed poisoned him? He took it to a nationally known lab to find out. Result – his medical cannabis was shown to have been contaminated with high levels of myclobutanil, a toxic fungicide.

According to Anthony Torres, a senior researcher at Steep Hill Labs in Berkeley, California, it”s especially toxic when inhaled. ‘Upon combustion, myclobutanil forms cyanide gas,’ he said, ‘which can make it into your bloodstream…’

Unfortunately, the dangerous fungicide isn”t the only contaminant that can be found in California”s legal pot supply. In a series of Steep Hill tests, 41 of 44 California pot products tested positive for 16 different pesticides.

Right now, the only way marijuana users from California – or anywhere else – can ensure their product is pure is through lab testing. Obviously, this isn”t a convenient solution for casual users. But help is on the way thanks to blockchain technology.

Blockchain is the technology that gave birth to bitcoin, litecoin and ethereum – three of the cryptocurrencies turning the world of financial transactions on its head. But the blockchain is impacting far more than the world of money.

In fact, blockchain can track, authenticate or verify any process, including the process of marijuana production and testing. That”s where the ‘BLOCKStrain™’ comes in.

BLOCKStrain (DNAX trading on the TSX Venture) is a proprietary software platform, which utilizes blockchain, that an innovative Canadian software company is unleashing on the marijuana industry.

BLOCKStrain is the brainchild of Tommy Stephenson, company CTO, Cameron Chell, the company Chairman and Robert Galarza, CEO. They formed BLOCKStrain after seeing the need for a more efficient marijuana industry verification system.

‘We are tackling one of the biggest issues in the cannabis industry,’ Galarza said, ‘which is verification and visibility of inventory and product for consumers, producers and government. ‘

One of the biggest challenges the wave of cannabis legalization is creating is satisfying consumer demand – far more people want to buy legal marijuana than governments had anticipated. This problem was highlighted in Nevada last summer, when three months” worth of inventory sold out in two weeks after the state legitimized recreational cannabis.

All that demand revealed current verification methods for ensuring genetic purity and product safety are administratively cumbersome and unacceptably time-consuming. BLOCKStrain”s technology aims to change all that.

BLOCKStrain also utilizes genetic testing to create a unique ‘fingerprint’ that”s recorded on the blockchain, and then associated to an individual QR code which is then embedded into a comprehensive tracking process. This makes the tracking and testing available on the blockchain viewable in a completely transparent way.

‘So if you are looking at markets where people are looking for a product,’ Galarza said, ‘with our system you can not only find the product, you can be sure that product is exactly what it says it is and that it is pesticide-free.’

The nuts and bolts of this system were created by Stephenson, the former CTO of California based Ghost Group which created the largest tech player in the cannabis space, Weedmaps.

The industry is beginning to see immense potential for BLOCKStrain Technology Corp. (DNAX trading on the TSX Venture), as evidenced by their having poured $10 million into the company in a private placement offering that was closed in March. That”s nearly three times more than the $3.5 million the company had originally sought.

BLOCKStrain”s ability to protect the intellectual property (IP) of growers” varietals and strains, including those under development, but also the complementary suite of software products the company is developing in order to maximize efficiency in this developing industry will have a ripple effect throughout the entire industry.

Early adopters of blockchain include WeedMD, Inc., a Canadian licensed producer of medical marijuana that has invested in the company and plans to integrate BLOCKStrain”s technology into its platform.

Derek Pedro, a design, cultivation and production partner at WeedMD, said the ability of BLOCKStrain to protect its many marijuana varietals was the key reason it signed on with the company.

‘After conducting an extensive review of the blockchain technologies being proposed for and utilized in the cannabis sector,’ he said, ‘we believe that BLOCKStrain is best positioned to protect our intellectual property by further validating and securing our best-in-class genetics.’

The importance of BLOCKStrain”s ability to protect cannabis industry IP cannot be overstated.

‘The biggest issue in the marketplace is that there is no practical intellectual property protection for cannabis strains,’ Galarza explained. ‘There was a case recently where a licensed producer sold a mothering plant for over $1 million dollars‘ he added, ‘but the secondary producer said that it died in transit.’

Yet somehow a product the secondary producer began selling shortly afterward was ‘eerily’ similar to the original licensed product. Galarza believes the secondary producer could have developed a hybrid from genetics the original licensed producer had supplied.

‘Essentially (that”s) bypassing the license,’ he said, adding that this could have been prevented if BLOCKStrain (DNAX trading on the TSX Venture) had been in use because the genetic ‘fingerprint’ would have been evidence showing that the secondary producer pirated the licensed product.  

In addition to WeedMD, several other licensed producers are expressing interest in signing on with BLOCKStrain. While these clients will obviously generate revenue, the company won”t be relying exclusively on large enterprise clients for it. That”s because its revenue model is built largely on volume and incremental usage.

The way it works is every user of the system will pay reasonable fees based on what parts of the blockchain they want to access, or which of its features they want to implement.

These include craft growers who want IP protection, individuals who want to make sure the product they”re buying is pesticide free, dispensaries that want to track where a product is in the testing cycle, and government agencies that want to verify the completion of tests.

In an industry where one strain can be worth millions of dollars, the potential earnings for a company that protects these strains could stand to earn big. ‘And as a technology company we can scale as global markets open up,’ he said. ‘It”s a system that we aim to integrate worldwide.’

BLOCKStrain (DNAX trading on the TSX Venture) is rolling out its technology in stages, with the first wave coming out in June. This version will feature its automated testing component, where growers can use the system to book their product for testing and track it to and from facilities and labs.

The second phase will be rolled out later this year and feature more comprehensive tracking distribution channels. For example, a grower will be able to track the delivery route of his product and how it”s split amongst stores along that route.

That there is a demonstrated need for BLOCKStrain”s technology is obvious, but it”s hardly the only reason forward-looking investors should consider it for their portfolios.

Here are four more:

1. The company is getting a huge jump on potential competitors.

‘There is nobody with a product like this in the market and we anticipate being ahead of everyone else,’ Galarza said, adding that the only potential near-term competitor has stated that they will begin development in November. ‘Apart from that we haven”t seen anything quite like this.’

2. Canada is expected to legalize recreational marijuana this summer. 

Last year legal marijuana sales hit $9.7 billion in North America. They could be on track to explode to $24.5 billion by 2021 – a figure that could go even higher with legal Canadian cannabis on the horizon.

As a Canadian company, BLOCKStrain (DNAX trading on the TSX Venture) will be in terrific position to not only capture revenue from the country”s booming recreational market, but also from the regulatory bodies in Canada that could use BLOCKStrain to ensure cannabis testing is done as required.

3. The worldwide marijuana market will skyrocket as more countries legalize pot…and BLOCKStrain could be positioned to get a piece of that action. 

Across the world, more than 50 countries are legalizing or decriminalizing cannabis. This is a big reason the global legal cannabis market is projected to grow from $14.3 billion in 2016 to $63 billion by 2024.

This growth will create a huge demand for BLOCKStrain”s technology, as it ensures a safe and legal inventory of a product that up until now has only been available illegally for recreational purposes.

4. BLOCKStrain”s platform has other potential applications besides the marijuana industry. 

Chief amongst these are the $3.2 trillion food industry. For example, if there is one type of banana and it is sent for testing to show that it was grown in a certain part of the world and done so organically, that could all be verified by BLOCKStrain.

These are just a few reasons why investors should keep an eye on BLOCKStrain Technology Corp. (DNAX trading on the TSX Venture ). However, as is often the case with disruptive technology companies, time is of the essence.

Other companies trying to capitalize on technology and cannabis:

Innovative Industrial Properties (NYSE:IIRP)”s leasing plan is simple: the marijuana grower is responsible for everything from taxes to maintenance. The company”s hands-off approach allows for a steady stream of revenue with little oversight.

AbbVie Inc (NYSE:ABBV) is one of the pioneers of marijuana-based treatment in the biopharmaceutical industry, realizing the potential of its cornerstone product, Marinol, years ahead of the competition.

Zynerba Pharmaceuticals (NASDAQ:ZYNE) is another innovator in the industry, creating a revolutionary transdermal THC patch, and the world”s first and only synthetic non-psychoactive CBD patch.

Insys Therapeutics (NASDAQ:INSY) broke ground with its sublingual pain medication, Subsys, and with its advanced knowledge of synthetic cannabinoids, the company created a novel CBD product used to treat pediatric epilepsy.

Compass Diversified Holdings (NYSE:CODI) has a key stake in Manitoba Harvest, a company which uses hemp, a type of cannabis which does not contain THC, to create hemp-based foods, oils, and supplements.

By. Meredith Taylor

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