You may or may not be familiar with the term “cryptocurrency”, which refers to a digital currency protected by encryption to improve security.
One such digital currency is Potcoin, which is touted as “Fast, Secure, and Portable.” What makes Potcoin unique among digital currencies is that it’s the first digital currency specifically intended to facilitate transactions within the legalized cannabis industry.
Legalized cannabis and cryptocurrencies are both very new with the overall economic system. This article aims to break down how Potcoin works and to answer some basic questions about the currency and the system as a whole.
Potcoin Early History
Potcoin first hit the market in January 2014 as the brainchild of a trio of entrepreneurs from Montreal, Quebec. About two weeks after its initial release, it was added to cryptocurrency exchange called Cryptorush, where it was immediately able to be exchanged for the popular cryptocurrency Bitcoin.
Since its inception, it has been a very volatile currency. For example, after being added to a legalized cannabis dispensary in February 2014, Potcoin’s market value exploded as speculators clamored to get on board. The digital currency even hit an all-time high in trading volume by the end of March 2014.
After peaking at a market capitalization of over $1 million USD on April 19th, 2014, Potcoin crashed rapidly, eventually sinking to a total capitalization of $244,000 on May 22nd of the same year. Following the placement of Potcoin ATMs in several legalized cannabis dispensaries, Potcoin’s market value soared again, reaching a new market apex of $1,860,000 on July 1, 2014. The original development team broke up in 2015, leading to another crash as speculators jumped off the board.
Like most cryptocurrencies, its history has involved massive peaks and valleys, as investors and speculators struggle to assign a long-term value to digital currencies – particularly those attached to one specific commodity, in this case, Potcoin to legalized cannabis. As of this writing in August 2018, Potcoin currently trades for about $0.036127 USD in digital exchanges. Potcoin currently has a market cap just under $8 million and trades at a daily volume of about $21,700 – a relatively modest daily trading volume.
Similar cryptocurrencies such as CloakCoin tend to trade in much higher volumes and hold their values more consistently. There are different explanations for this, but the takeaway as that while it has secured a foothold, it has been an up-and-down battle for Potcoin to secure itself in the cryptocurrency market. .
How and Where to Use Potcoin
As noted above, Potcoin was explicitly created for use in the purchase and sale of legalized cannabis. In the United States, this is still a limited market, even if it’s growing rapidly.
A key problem halting the growth of the industry is the marijuana is still federally illegal, and thus most dispensaries and legalized cannabis distributors are forced to work exclusively with cash. This makes dispensaries ripe for theft and major targets for criminal activity.
Potcoin was created in part to address this problem, circumventing federal restrictions and providing a secure, alternate currency to cash for use in the purchase and sale of legalized cannabis. As of this writing, medical marijuana is currently legal in 30 of the 50 states in America, and cannabis is legal for recreational use in nine states including the District of Columbia. Given the financial success of legalized dispensaries across America, this figure is expected to grow by leaps and bounds.
Aggregate retail sales of legalized marijuana are $6.5 billion to date. This figure is expected to soar to $30 billion by 2021 and projects to hit $50 billion by 2026. It’s clearly a growth market. Given the growth of the market and the need for an alternate currency to cash, it’s likely that dispensaries across the United States will begin to accept Potcoin as a primary alternative to cash. Some may even install Potcoin ATMs to further improve safety and reduce the likelihood of theft.
At the moment, it serves as another decentralized peer-to-peer digital exchange currency. Decentralization means that Potcoin can be exchanged globally unencumbered by local or national economic issues. Many proponents of cryptocurrencies love the fact that currencies like Potcoin are not attached to a particular economy or government and thus are not subject to any one government’s agenda. This is the main reason why users go to the trouble of cashing in Dollars and Euros for digital currency. To buy and sell Potcoin or any cryptocurrency, a user first needs to create a Digital Wallet. This is where electronic currency is stored.
The Potcoin website provides a list of merchants, both online and brick-and-mortar, where Potcoin is accepted. Moreover, Potcoin actively accepts merchants, allowing them to sign up through a service called PotWallet. The company is making continual efforts to connect buyers and sellers in a safe, secure manner, limiting buyer risk while also improving ease of use.
The system isn’t perfect, but it continues to evolve and grow, and the developers behind Potcoin are being very proactive in growing the digital currency.
Advantages of Potcoin
In 2017, the developers behind Potcoin switched to a Proof of Stake (PoS) system, meaning that Potcoin can accrue interest at a rate of 5-7%, based on their transaction history and total holdings.
This is far superior to what many users make leaving cash in a standard checking account, which often has accrual rates of under 1%. This in and of itself makes Potcoin investable.
Additionally, Potcoin fees are often under 1%, which makes the use of Potcoin very favorable compared to credit cards – most of which have fees running anywhere from 6-30%. Those who view Potcoin strictly as an investment can buy into Potcoin at a relative-low, as the Potcoin-per-Dollar conversion is fractional and the total trading volume is modest.
Cryptocurrencies are much safer than the average person suspects them to be. While nothing is hack-proof, the lengths that developers go to in encrypting their respective digital currencies meet or surpass those put in place by major financial institutions. Most people reading this have unfortunately had their checking account or credit card numbers stolen and misused. Cryptocurrencies such as Potcoin are at least as safe as credit or debit card accounts, given that their creators and primary users tend to be extremely tech-savvy.
Disadvantages of Potcoin
As explained above, it has had an extremely volatile history, even compared to other cryptocurrencies. One explanation is that Potcoin does not have the support of a large commodity behind it in the same way that Bitcoin or larger digital currencies do.
This means that the highs are higher and the lows are lower. Still makes many seasoned investors reluctant to endorse it and will even give pause to those who regularly purchase legalized cannabis. Potcoin can only be used in the purchase and sale of cannabis, which limits the amount that people will invest in it. Many people willing to invest in digital currency will prefer a cryptocurrency like Bitcoin or Ethereum, which has much more versatility.
There are some that are concerned that the United States government will quickly reverse their stance on legalized marijuana, which would not only crush the value of Potcoin but also make those who buy and sell marijuana potentially at risk for arrest. It’s hard to gauge how founded or unfounded these concerns are, but it’s worth stating that Potcoin does have the potential to crash suddenly. This has been shown in Potcoin’s history, as well as the tenuous legality of the commodity to which Potcoin is attached.
Potcoin is technically considered an “Altcoin”, meaning that it was developed in the wake of bigger cryptocurrencies such as Bitcoin with distinct strengths and weaknesses. Those distinctions have been covered at length throughout the article. But as with most Altcoins, Bitcoin has a small total market capitalization ($7-$11 million). This figure seems impressive until one learns that Bitcoin currently has a market cap of around $110,905,115,267 USD.
Altcoins remain investable because they are so inexpensive to buy into, but an investor needs to know about both the ceiling and the volatility of Potcoin before committing to a big investment. Lastly, it faces the same problem that many other smaller Altcoins do, which is that investors primarily use the currency for high-risk/high-reward gambling.
Investors buy massive amounts of cryptocurrency such as Potcoin following a spike – in one case, when Potcoin sponsored Dennis Rodman’s January 2018 trip to South Korea – and then dump the currency while it’s at a high. Opponents of cryptocurrency have long cited this problem, as cryptocurrency has not yet become functional enough for mainstream use.
While people who understand tech very well have no problems going through the exchange process, the average consumer usually finds the exchange process not only time-consuming, but also boring and frustrating. In short, potential purchasers need to know that this buy-and-flip practice happens with most Altcoin currencies, Potcoin included, and accordingly protect themselves.
The Future of Potcoin
Legalized cannabis sales have proven to be boons for state and local economies, and the widespread legalization of marijuana sales appears to be a runaway train at this point. Potcoin obviously factors in as an alternate currency to be used exclusively in legalized cannabis transactions. This alone makes many people bullish on the future of Potcoin.
Still, cryptocurrencies as a whole are in relative infancy, and smaller Altcoins such as Potcoin need to continue to prove their worth – both in terms of functionality and longevity – before the average consumer overcommits to them.