WASHINGTON -- Walk into your local marijuana dispensary. Open your wallet, pay for your purchases, and walk out–all without swiping a credit card bearing your name, or forking over a pile of cash that could make the dispensary vulnerable to theft.
The trick? Your wallet is an app on your smartphone, and the money you're paying with is virtual coin, stored in the cloud.
The developers of PotCoin and DopeCoin, two virtual currencies for the cannabis market, say that future is coming. They're getting closer to creating industry-standard forms of payment–and it's a brave new world they're forecasting.
If this is your first brush with digital or virtual currencies, fasten your seatbelt. We're headed for corners of the Web you probably didn't know existed.
Virtual currencies are stored electronically and can be used to purchase goods and services, typically on the Web. They can be obtained with traditional currency, credit or debit cards, money orders, wire transfers, or other virtual currencies from online exchanges.
Virtual currency also can be obtained by a more complicated process called mining, in which the more tech-savvy use computers to solve mathematical equations and are rewarded with coins.
Many virtual currencies are exchanged across networks of computers that run sophisticated algorithms to ensure transaction anonymity and security. These "cryptocurrencies" are stored in virtual "wallets." Bitcoin, introduced in 2009 by a Japanese developer, was the first cryptocurrency adopted on a global scale.
Virtual currencies are entirely decentralized–meaning that no individual or entity can claim others' coins or "mint" new ones. Unlike legal-tender physical currencies, no government or central monetary authority insures the value of virtual currencies. The European Central Bank in 2012 defined digital currencies as "a type of unregulated, digital money, which is issued and usually controlled by its developers, and used and accepted among the members of a specific virtual community." The U.S. Treasury's official word is that a virtual currency is "a medium of exchange that operates like a currency in some environments, but does not have all the attributes of real currency."
Advocates say cryptocurrencies provide unmatched convenience and anonymity for users. Detractors argue their decentralized nature opens up a world of fraudulent possibilities. The U.S. Securities and Exchange Commission has warned that Bitcoin and other virtual currencies have already been used in Ponzi schemes.
PotCoin and DopeCoin, the currencies developed specifically for the cannabis market, contain security features built in to protect commercial transactions. A PotCoin wallet, for example, contains a set of private encryption keys that unlock funds sent to sellers. Only the holder of the wallet can spend the coins it contains. Once funds are transferred to a seller, they cannot be retrieved.
PotCoin's developers could not be reached for comment, but the company's website states that it hopes to reduce cash transactions and merchant card fees while incentivizing consumer loyalty and lending credibility to an emerging market.
"Essentially, holders of a cryptocurrency act as their own bank," according to the site
Coins can be purchased online with traditional currency, or by trading in Bitcoins. The tech-savvy can dive deeper in PotCoin's Reddit and DopeCoin's forum.
If you're still lost, we don't blame you–it's complicated stuff. AÂ DopeCoin developer who asked to retain anonymity said it's easiest to think of altcoins as digital gold. "It has all the same properties as gold, and even better," he said. "What makes DopeCoin stick out is you can specifically buy products in a truly anonymous manner."
PotCoin is accepted at approximately 40 online retailers, while DopeCoin is accepted at two, SmokeCartel and PixSkull, which sell glassware and pipes. The latter is currently revamping its shopping-cart interface to work with more vendors.
"Our vision is to have a network of shops accepting DopeCoin as payment," the developer said.
Some of those shops will be the brick-and-mortar variety, if developers realize their visions. They want to give medical and recreational marijuana dispensaries a safer, non-cash option for daily transactions. Dispensaries in the U.S. cannot access traditional banking systems because marijuana is illegal under federal law. Their cash-only transactions can make them vulnerable to robberies and other crimes.
The future hasn't arrived just yet. It isn't clear whether purchasing marijuana with virtual currency violates the seed-to-sale tracking requirements in Washington and Colorado, but developers say transactions can be tracked to particular sales, if necessary, while still protecting the identity of the purchaser.
And as with most other altcoins, cannabis currencies these days are trading hands mainly in speculative transactions, with investors angling to profit from swings in market prices for the coins.Â
This will soon change, according to DopeCoin's principals. Both DopeCoin and PotCoin will be accepted on the latest incarnation of an online black market called Silk Road, which sells drugs, counterfeit goods, fake money and hacking tools. The U.S. government has shut down two prior iterations of the "darkmarket," but a third, called Silk Road Reloaded, launched earlier this month.
"They are the first darkmarket to accept a variety of altcoins," said the DopeCoin developer. "We think this is the future of usability for DopeCoin: a real use-case scenario to help create liquidity for our coin."
He did not express concern about cannabis currencies being associated with illicit goods.
"The goal is to provide a safe method for the consumers to purchase the goods they seek," the developer said. "The reality of it is that we have no control over how people spend their DopeCoins, as it is no different than Bitcoin in this sense. If people are going to spend their coins in this way, regardless, why not have them do it in a safe and effective manner? The solution is coming, and it's just a matter of time."
Photo courtesy DopeCoins
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