Emerald Health Therapeutics and DMG Blockchain Solutions Create LOI to Create Supply Chain Management System and E-Commerce Platform

Jan 30, 2018

Emerald Health Therapeutics, Inc. (TSXV: EMH) (OTCQX: EMHTF) and DMG Blockchain Solutions Inc. have completed a letter of intent to form a joint venture, CannaChain Technologies, to develop a foundational blockchain-based supply chain management system and e-commerce marketplace for the legal cannabis industry. 

The cannabis supply chain includes many touchpoints as it moves from seed to consumer.

CannaChain’s supply chain management platform aims to provide total transparency and assurances for consumers about the source of a cannabis product and its related attributes. The platform will assist in ensuring adherence to Health Canada reporting requirements.

By logging each step along the supply chain on the blockchain - a decentralized, timestamped, and unhackable digital ledger - this ground-breaking platform is expected to provide an irrefutable record outlining the journey the product has made, from beginning to end.

“There are notable new applications of blockchain technology to validate and assure the source, quality and integrity of products such as diamonds, wine, and art, along with coffee and other food products,” said Avtar Dhillon, MD, Executive Chairman of Emerald Health Therapeutics. “Cannabis is also a prime industry in which to apply blockchain supply management based on the broad spectrum of plant and growing attributes, as well as product innovation potential; the growing trend of medical and in some cases recreational legalization, with the need for licensing as well as high security and confidence; and the possibility to start off such an initiative with relatively small groups of pertinent stakeholders. Canada’s established experience with medical cannabis regulations also lends it to new innovation in areas such as supply chain operations.”

Emerald will provide its expertise and relationships as one of the earliest Canadian Licensed Producers. DMG Blockchain Solutions, a blockchain supply chain solutions developer, and leading crypto mining hosting provider will build and deploy a blockchain solution to meet the opportunities and challenges of the cannabis industry. The solution will serve stakeholders including government agencies, distributors, producers, shippers, and consumers.

Adrian Glover, DMG’s Director of Software Engineering, commented, “Supply chain management for cannabis is an ideal use case for blockchain’s tamper-proof ledger technology. We are excited to partner with Emerald and, through the formation of CannaChain Technologies, to provide such an integral solution for the Canadian medicinal market.”

The parties intend for Cannachain to develop an e-commerce marketplace based on the blockchain-based supply chain management system to facilitate the sale of products enhanced by unprecedented supporting data and trust.

CannaChain’s supply chain management platform will leverage an existing open source blockchain platform, enabling cross-industry collaboration capable of supporting global business transactions with important technology, financial, and supply chain companies. These tools will allow smart contract functionality, imperative to the automation of trust.  Regulatory reporting requirements would be automated by the platform, making for a seamless, supply chain management solution for Licensed Producers.

Heavy Weight Competition

According to an article on Coindesk, IBM (NYSE: IBM) recently submitted a blockchain proposal to British Columbia’s Cannabis Regulation Engagement committee. In the document titled, BlockChain: An Irrefutable Chain of Custody Audit for the Seed to Sale of Cannabis in BC”, IBM says:

“IBM suggests Blockchain is an ideal mechanism in which BC can transparently capture the history of cannabis through the entire supply chain, ultimately ensuring consumer safety while exerting regulatory control – from seed to sale.

Blockchain is rapidly becoming a world-leading technology enabling the assured exchange of value in both digital and tangible assets while protecting privacy and eliminating fraud. Its relevance to regulating cannabis is similar to its many chain of custody applications in areas such as pharmaceutical distribution and food chains. The core to those supply chains is the same, assuring health and safety of consumers, preventing fraud and counterfeiting while creating a foundation of transparency upon which to base regulation.”

IBM goes further in stating the benefits of blockchain:

“Blockchain can help the Provincial Government take control of sourcing, selling and pricing of products, therefore can reduce or eliminate black market sales completely.

Blockchain can assist producers with real-time inventory management, greater projections of supply and demand, and also elicit trends of consumption through data analytics.

 Although the Government of BC hasn't confirmed its what end user distribution model will be used, we anticipate that it is likely that government itself will play a role in that process. An interconnected

Blockchain network can assist retailers to identify supply/demand gaps ways to mitigate those gaps, providing feedback mechanisms to producers, and use data to create predictive insights.”

Besides Big Blue, there are at least a couple dozen companies wanting to apply blockchain technology to the cannabis industry. The Colorado legislature is even considering legislation to make use of a blockchain system mandatory.

Best of luck to Emerald and DMG.

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