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Psilocybin and Heat
by Erowid

I'd say the question of Psilocybin + Heat is no longer a controversy, its a misunderstanding coupled with incomplete data. I think the open question is whether all dried mushrooms can be boiled without significant loss or whether some types react better or worse to this treatment.

Sub-boiling or lightly boiling water does not noticably reduce the activity of dried Psilocybe cubensis. Many people ingest their mushrooms as tea without needing to increase the quantity used. We know of people who regularly boil their mushrooms for up to 30 mins before drinking the resulting liquid. All fully active. The hotter the water, the better. The water should be at least slightly acidic, but psilocybin is highly water soluble.

So, the experience of many people says it works. Smoking mushrooms can work, but most mushrooms aren't terribly potent so you need to smoke a lot of mushrooms to get a strong effect (imagine smoking 2 grams of mushrooms ! yuck!). But many reliable sources report a mild effect at smoking a bowl or two and this is potentiated by other entheogens (LSD specifically).

However, this is not to say that psilocin, another active chemical, won't break down quickly in boiling water (it probably will). Different types of mushrooms contain differing ratios of psilocybin to psilocin, so it seems quite possible that different strains would fare differently with boiling or hot water extractions. There is evidence to suggest that some degree of potency loss occurs if Psilocybe cyanescens are heated by a method such as boiling.