PotCoin is a blockchain platform supporting a cryptocurrency that addresses a specific problem. U.S. banking services are not generally available to the legal cannabis industry. Although many states have made the cannabis industry legal, cannabis remains illegal at the federal level, a “schedule 1” substance. Federal law prohibits federal institutions, including banks, from dealing with companies involved in this industry.
That seems odd, to say the least, given the size of the cannabis business now legal at the state level. Sales of legal recreational cannabis in the United States may reach an estimated $25 billion by 2025. Three entrepreneurs in Montreal launched PotCoin in 2014. They aimed to fill the yawning gap created by the lack of banking services for companies springing up to serve the new market: dispensaries, manufacturers of the products, and retailers—as well as customers (including medical marijuana patients) for cannabis products.
PotCoin, at least for now, is limited to the niche for which it was created: the legal cannabis industry. Much of the demand for it comes from companies requiring banking services. However, Potcoin has created and keeps creating features for its platform that appeal to businesses and consumers alike.
The blockchain solution is a free, peer-to-peer electronic cash system that is wholly decentralized. It does not require a central server or trusted parties. Users of PotCoin hold the crypto keys to their money and transact business peer-to-peer without any intermediary, but supported by a P2P network to prevent double-spending.
The cryptocurrency (token ID: $POT) has become a medium of exchange for legal cannabis dispensaries and other businesses. It has provided an immutable ledger of transactions between buyers and sellers. With PotCoin, anyone can buy cannabis and its burgeoning-related products and do so anonymously but also securely. The creators initially based the blockchain-supported cryptocurrency on the source code of Litecoin, another digital currency. But PotCoin’s system is open source (the code is available on Github). Improvements and changes to its code can be made by anyone.
Thus, PotCoin has diverged from Litecoin, but still retains the relatively low transaction fees and rapid processing times of Litecoin. What PotCoin, as a niche currency, does not have is a large community supporting it. (As do Bitcoin and Ethereum, for example.) That tends to make it less liquid and more volatile in response, for example, to news affecting the cannabis industry.
Banking Services for the Cannabis Industry
What has worked is PotCoin’s alternative to banking services for the cannabis business. It’s a relatively small and limited cryptocurrency. However, PotCoin has its own digital wallet, which users, including companies, can adopt for their transactions and to store their PotCoins. Were it not for the cryptocurrency, cannabis companies would have to conduct business exclusively in cash. Without bank accounts or credit cards, much of the business of the companies would be not only clumsy or impossible but also very high-risk.
By providing a workable, safe blockchain alternative to banking for marijuana growers, manufacturers, shippers, and dispensaries, PotCoin can now report more than $1.0 billion cumulatively in PotCoin transactions by more than 408,000 network participants. With the PotWallet and the trading platform, any network participant can use, store, trade, and accept PotCoins. And now, most of that (sending, receiving, and storing) can be done on an iPhone or Android cellphone.
The problem that the blockchain platform and cryptocurrency have helped to solve—lack of basic banking services–can only get bigger. The marijuana business is booming and becoming legal in more and more jurisdictions. It now includes the District of Columbia which has legalized both medical marijuana, recreational marijuana, or both. In this environment, PotCoin states that its goal is to serve the legal cannabis industry internationally, and, indeed, PotCoin and its features are available worldwide.
PotCoin has evolved and continues to announce new features. For example, the PotCoin blockchain began with a proof-of-work protocol, but in 2015 switched to using proof-of-stake velocity (PoSV) operating protocol. That is a variation on the more widely known proof-of-stake approach, rewarding coin holders for the frequency of their transactions using their cryptocurrency.
Like other blockchain platforms for transactions, it gives a purchaser in the cannabis industry the ability to track and trace the origin of their supplies, automate their compliance tasks, and conduct real-time auditing directly “on-chain.”
In the second quarter of 2021, PotCoin announced that it would support peer-to-peer business loans, not generally available to the cannabis industry from banks. They called this feature Decentralized Finance (DeFi). And in the works, now, is a credit card. The website says that this credit card will enable users to participate in the traditional financial system using their PotCoins with “real-time conversions anywhere that accept debit and credit cards.”
How has the $POT token fared as a cryptocurrency? As mentioned above, the limited $POT community, although seemingly destined for unlimited growth, for now, makes POT’s value volatile. A by-now widely known example is the 2017 trip to North Korea by Dennis Rodman, who, during the widely publicized trip, endorsed PotCoin. That rocketed its value some 90 percent in less than 24 hours. The rise in value peaked at the end of 2018 at $0.5083. Declining ever since, $POT at the end of 2021 was trading at less than one U.S. penny.
Anyone, of course, can buy PotCoin on any cryptocurrency exchange that lists it. Right now, the most established crypto exchange is Bittrex.
The Pros and Cons and the Future
Stepping back to view this record, the balance of strengths and possible weaknesses of PotCoin seem tilted to the positive in the short-term and far less certain in the long term.
On the plus side, it has achieved its core mission. It has enabled cannabis buyers and sellers to conduct rapid, secure, and even anonymous online transactions with no thanks to traditional financial institutions. All such transactions are facilitated and simplified by the digital wallet that PotCoin, despite its limited size, hosts. All transactions enjoy the security of a blockchain ledger that records them and, once the block by common consent is closed, they remain auditable (fully transparent) but also immutable. The peer-to-peer nature of transactions arguably gives users more control and perhaps more security than traditional banking services. Other banking functions like business loans can be conducted participant-to-participant. And PotCoin announces that more features are in the works.
Drawbacks or potential drawbacks are that PotCoin’s “use case” is limited to the legal cannabis industry. Like any cryptocurrency, PotCoin, if required for doing business with a company—say a dispensary—may represent a challenge for those unfamiliar with crypto. The volatility of POT’s market price and its comparatively low trading volume limit the crypto’s liquidity and so the size of transactions. And, finally, observers keep worrying that given the continuing paradox of state legality and federal illegality, federal investigators may be able to require an end to anonymous PotCoin transactions. By their nature, of course, all such transactions leave a digital footprint.
Another consideration is that PotCoin no longer has the field to itself. Other “marijuana-centric” cryptocurrencies, including DopeCoin and CannabisCoin, have jumped into the explosively expanding legal cannabis market. In other words, PotCoin began with some built-in limits. Other limits have become apparent even as PotCoin has established itself. There are potentially more limits on the horizon—not least the possibility of the eventual legalization of cannabis at the federal level. At least in the United States, that would seem to challenge PotCoin’s very reason for being.