Editor’s note: this article is a guest contribution from Alan, founder of Strainly.
The world has experienced an unprecedented consolidation of power and wealth in recent years, with big government, big banks, and big pharma all working together to concentrate ever more power and attack households and family businesses. At the very core of this issue lies money. Or rather, monetary policy. Why? Let’s dive in.
Ever More Concerning Power Grabs
The problems faced by the cannabis industry predate the COVID-19 era. The cannabis community has always been concerned about corporate takeovers and consolidation, even before legalization occurred. Many in the industry have feared that it could become a manifestation of big agriculture, big tobacco, and big pharma. This fear is becoming a reality, as consolidation is happening right before our eyes and many feel powerless to stop it. Access to basic financial services has been a struggle for many in the industry, and as a result, a parallel financial system has emerged as an alternative to the broken legacy system.
A Broken System
The legacy system, based on fiat currency, is controlled by central banks and creates money out of thin air. This system unfairly distributes wealth, with the majority going to insiders while the rest struggle to survive and pay interests to those in power. Since the end of the gold standard in 1971, the purchasing power of fiat currencies such as the US dollar has significantly decreased. This has led to consumers and businesses taking on more credit to acquire the assets they need, which can be extremely challenging for cannabis industry businesses. Add to that the additional regulatory burdens faced by cannabis businesses, and we’ve created an environment where small and family-run businesses have to struggle immensely to even stay afloat, let alone turn a profit.
The fiat system is closely tied to the principle of proprietary ownership, where innovators seek exclusive rights over their “intellectual property” and any of its derivatives to prevent anyone else from profiting from or modifying their work. In the context of cannabis, this system incentivizes breeders to limit access to their cultivars and restricts other breeders from improving the genetic pool, ultimately leading to a destruction of biodiversity. It also leads to predatory practices against farmers who inadvertently breach patents by being cross-pollinated by proprietary varieties. The fiat system, along with predatory proprietary practices, hampers innovation while consolidation prevails, as smaller businesses struggle to compete in a system controlled by corporations. This system is undeniably penetrating the cannabis industry, as I have been writing for many years.
The industry has been consolidating at an alarming rate, with debt-ridden corporations and cronies pushing legacy farms out of the market while flooding it with low-quality products. This race to the bottom is a direct result of the fiat-based market system, which encourages consolidation and does not favor high-quality craft products. Small-scale craft producers often struggle to thrive in a system that demands economies of scale and unattainable compliance requirements. Instead of consolidating the cannabis industry based on capital expenditure, I’d argue that a Bitcoin-centric industry would reward craft producers based on the quality they bring to the market, rather than the size of their operations. How?
A New Paradigm: Money Limited in Quantity, Just Like Nature
While many may still view cryptocurrencies with skepticism, I am convinced that using “sound money”–specifically Bitcoin–addresses a lot of the issues described above. Sound money is limited in quantity and therefore maintains its value over time, thus rewarding hard work and innovation. Bitcoin, as a decentralized and limited currency, offers a viable alternative to fiat money. It separates money from the State and corrupt politicians and central bankers, while securing transactions between parties without the need for intermediaries. Bitcoin is not subject to the inflationary pressures of fiat currencies and is designed to increase scarcity over time, rewarding delayed gratification and long-term thinking.
By using Bitcoin, breeders and growers can be paid in a currency that allows them to focus on their craft without the need to engage in patent wars or defend intellectual property.
Unlike the corporate agricultural behemoths who patent crop genetics and then sue neighboring farmers when their fields get cross-pollinated, when it comes to cannabis, open-source breeding is arguably the most suitable intellectual property (IP) strategy for small breeders and farmers. Engaging in patent wars with limited resources is often a losing battle, simply because obtaining a plant patent on your strain (as a breeder) does not actually prevent anyone from using your genetics. It merely gives you legal grounds to pay a law firm and take the infringer to court, which implies that you have cash set aside, raised money from investors or loans from banks. If the other party has deep pockets, it’s very easy to bankrupt you through legal proceedings. They literally turn your IP against you. It’s a game where the party that is ultimately closest to that “easy money” printer (through subsidies and tax credits, investments, or loans) always wins.
Bitcoin provides an alternative solution by allowing breeders and growers to be paid in a currency that appreciates in value and preserves the value of their hard work. Hard money. It protects their anonymity and enables them to transact with anyone in the world, without the need for permission from intermediaries. Bitcoin provides breeders the opportunity to focus on their craft and generate revenue based on the desirability of their genetics, rather than defending intellectual property to collect perpetual rents. Because breeders and growers should not be aiming to find ways to get closer to the money printer to thrive.
In addition to promoting financial autonomy, Bitcoin also addresses the issue of transaction settlement, which has been a central problem for legal cannabis businesses that have been excluded from the traditional banking system. Many of these businesses have had to rely on cash transactions, which come with practical and security challenges. Bitcoin’s trustless and instant transaction settlement between parties provides a more secure and efficient way to transact, without relying on banks or payment processors. This removes the need to pay (often outrageous) processing fees and allows businesses to be self-reliant rather than depending on financial institutions that have historically been hostile towards the cannabis industry.
Conclusion
Strainly has been using bitcoin as our only payment gateway for over a year, and we have found that being a bitcoin-only business is not only feasible, but empowering.
Of course, it pays to be cautious, and skeptics will undoubtedly be nervous about widely-publicized price swings and “crashes” in the crypto markets over the past few years. The fact that Bitcoin is still in its early stages of adoption and is not yet widely used as a medium of exchange or store of value contributes to its volatility. It’s existed for only 15 years and is the only truly decentralized form of money, which can lead to more pronounced price movements as there is no entity to stabilize the market. As more people become aware of and use Bitcoin, its price should become less volatile. It’s worth noting that since its inception, however, bitcoin has appreciated more than any other asset, by far.
In conclusion, I believe that Bitcoin is the natural fit for the cannabis industry. If you believe in decentralization, open-source technology, resilience, and biodiversity, Bitcoin aligns perfectly with these values. It offers a sound money system that promotes financial autonomy, equitable distribution of wealth (that has to be earned and cannot be printed out of thin air), which ultimately protects biodiversity by fostering low time preference, or in other words, a long term vision. It addresses transaction settlement and allows breeders and growers to be rewarded for their hard work, focusing on quality rather than engaging in patent wars and defending artificial moats. Ultimately, bitcoin empowers businesses to be self-reliant, free from the constraints of the broken financial system.
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