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Decentralized Identities for the Cannabis Industry

Authors

  • Matthew Nguyen
    • Github: @MattNguyen
  • Nicholas Shook
    • Github: @Shicholas

Background

Cannabis is a highly regulated environment where each facility is required to track the chain of custody of each plant and plant-derived product. This includes identifying each person that managed the product and the cannabis. These regulations are important to prevent the inversion and diversion of cannabis products to and from black markets. States require implementing a traceability system, analogous to the pharmaceutical industry, that monitors inflow and outflows of cannabis, providing accountability for all stakeholders along the cannabis supply chain.

Before someone is eligible to work at a cannabis facility, they are subject to a background check conducted by the State. In Nevada, the background check is conducted by the Department of Taxation. For owners or managers of a facility, a financial background search is also conducted, inclusive of examining all of the financial history of a given person that owns more than 5% of the Company.

When it comes to the customers, there are two types: medical patients, which need an Identification or Doctor’s Letter from a state or jurisdiction with a medical marijuana program; and recreational users, who are required to provide a simple identification that the customer is over 21 in certain states such as California, Oregon, and Nevada.

Identity is thus important for two reasons, for the first, it’s important to establish self-sovereignty for an industry that’s strictly regulated on the one hand, but looked down upon by the feds who have purposefully vague laws. Customer identity and their privacy should be protected, and employees of cannabis businesses should be encouraged to develop best practices for managing their role in the supply chain. Secondly, identity actors form a self-reinforcing graph of trust that facilitates compliance with various jurisdictions and promotes public safety. Cryptographic identities are a key ingredient in making this system work.

Blockchain presents an opportunity to introduce self-sovereign identities as a way for individuals and organizations to provide identity claims to navigate this highly regulatory landscape. From the consumer perspective, since I am able to own my identity, I can divulge the age and identification requirements necessary to enter dispensaries. Regarding employment, the situation is more complex. As an employer, how would I access an employee’s employment history? If this person were blacklisted from other cannabis businesses, should I know? How? Later sections will explore how we plan on tackling this issue.

Though identity will play a central role, governments are slow to respond. Some forward thinking governments have begun adopting decentralized identities, such as the city of Zug and Brazil. However, usage of these identity systems in highly regulated markets such as cannabis remain to be seen. We plan on taking a different approach to adoption.

Solution

Our issuing credential will be the Cannaledger Foundation (Foundation), a non-profit that certifies claims inspectors on the blockchain. The Foundation will certify and verify the legal authority of certain licensed attorneys to serve as claims inspectors who will add the identities of the individuals to the blockchain. An individual or organization seeking claims attestations can visit an attorney with their legal photo identification and their latest bank statement and be certified to be over 21 years old. For employees, more information such as their state agent card application form and card, may be required. For businesses, inspectors can verify business documents relating to their incorporation status and their commercial licenses for medicinal and recreational marijuana.

The diagram below outlines the claims verification tree:

Claims Verification

The following table describes the types of verifications each entity will perform on its child:

Verifications Table

Claims data will be recorded to the blockchain, and the type of data stored depends on the subject of the claims. For instance, when the Foundation onboards new attorneys into the network, the foundation will collect information regarding the lawyer’s qualifications to practice law in Nevada, including their State Bar license. The Foundation will then sign the attestation using their private key. This process continues for all other attestations in the trust graph.

The Foundation serves a critical role in this system. Since the actual regulatory bodies issuing credentials will be slow to adopt DIDs, a consortium of legal entities will provide interim support to individuals and businesses, leveraging their legal authority to back identity claims. When State institutions are ready to adopt DIDs, they may issue claims to identity holders, thus providing more legitimacy to existing claims. In this web of trust model, issuers do not need to exist, but need to be verifiable by third parties.

To create this identity system, we chose uPort to store identities on the Ethereum blockchain. uPort provides the requisite feature-set to implement this graph of trust. In addition to providing the APIs for identity creation and claim attestation, uPort’s identity social recovery mechanism ensures that identity profiles are transferable to other devices. Moreover, by providing proofs and digital signatures for claims within identity documents, we can attain a degree of trust that a particular identity and its claims are authentic.

Beyond Identities

With the identity layer in place, the cannabis industry can begin implementing other interesting applications, particularly those in the supply chain space. We’re interested in using these digital identities to interact with other identities (individuals, organizations, and devices) through a shared authentication and authorization layer that manages supply chain compliance with the State.

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