Blockchain may yet prove its worth in the circular economy

AJ Gonzalez | January 18, 2022

TechMonitor, By Pete Swabey  17 Jan 2022 (Last Updated 18 Jan 2022)

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Blockchain enables reuse and recycling.   The circular economy requires tracing products & materials across supply chains.

Use cases for blockchain in the circular economy

45% of global emissions are produced during the manufacturing of goods. Increasing recycling and reuse in five areas – cement, aluminium, steel, plastics and food – could cut those emissions by nearly half, according to the Ellen MacArthur Foundation.   Meanwhile, 90% of biodiversity loss and water stress is caused by resource extraction or processing.

Without knowing what a product is made of, it cannot be recycled; without knowing how it has been used, the potential for reuse is also unknown. “For a circular economy to function it is not only resources which need to circulate, but also information,” Dutch start-up Circularise notes.   Proponents see blockchain technology as the ideal mechanism for this, due to its transparency and traceability. Transactions on a blockchain are stored in a distributed fashion and verified collectively, ideal for processes that cross multiple organisations, many of which will never interact.Smart contracts – automated functions triggered by events on a blockchain, such as pricing a piece of equipment for resale based on how often it has been used – and Tokenisation. Could encourage participants to share data, or take some other beneficial action, in exchange for blockchain-specific currency.
Pilots and piecemeal progress
Porsche, which uses technology from Circularise to trace the provenance and carbon impact of the materials used in the car parts it buys.Fashion label Alexander McQueen set up McQ, an online community that allows collectors to register ownership of their luxury garments, enabling resale based on blockchain technology.Shell has created blockchain-based digital passports for its equipment.
Blockchain and the circular economy: the challenges
The question remains how a technology might be able to create trust, if there is a lack of trust in the first place.Heim also discovered a reluctance to create wholly transparent supply chains, which could require companies to divulge sensitive information. “Developers are finding that blockchain is not always wanted in its ‘purest’ form by large-scale firms,” her study notes.
Blockchain and the circular economy: reasons for optimism
One reason for Heim’s optimism is a pilot project by the UN Economic Commission for Europe to create a blockchain to support transparency in the cotton supply chain. Cotton cultivation alone accounts for 16% of the world’s total pesticide use, according to the UN; the cotton in a single T-shirt requires 2,700 litres of water to grow.Meanwhile, technological advances are enabling more sophisticated approaches to information sharing. Privacy-preserving technologies such as confidential computing, in which sensitive data is processed in isolation from other systems, and ‘zero-knowledge proofs’, which can verify true or false statements without exposing sensitive data, could reassure organisations that data shared on a blockchain-based system won’t fall into the wrong hands, explains Petko Karamotchev, CEO of technology consultancy Industria.

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