How Blockchain can advance the circular economy

November 8, 2018

Virtual currencies could be the missing piece to making circular business models competitive

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There is an abundance of theoretical knowledge on the advantages of new disruptive emerging technologies such as blockchain, but it is much harder to prove the actual benefits in practice. In the next 3 – 6 months, a consortium made up of Circle Economy, Sustainable Finance Lab, Nederland Circulair!, Rabobank, Bundles, Allen & Overy, ING and De Lage Landen are bringing together enabling knowledge, technology and experts to test the possibilities of Blockchain for circular pay-per-use models in a Community of Practice.

This Community of Practice (CoP) will explore how Blockchain technology can facilitate circular pay-per-use models. The CoP, co-funded by NederlandCirculair!, will pilot Bundles, a circular company that offers pay-per-use washing machines, on a Blockchain platform developed by Rabobank.

Access instead of ownership is seen as one of the potential drivers for the transition towards a circular economy. Pay-per-use models are facilitating this shift and are widely seen as an important tool to put a circular economy into practice. In pay-per-use models, customers pay for the use of a product instead of possession. This model creates incentives for products that last, stimulates value chains to work together and places more responsibility on producers for the collection, processing and reuse of products.

The challenge

However, financing pay-per-use businesses is a challenge as the product is not sold, the payback period is longer, creating higher (upfront) capital requirements. In addition, transaction costs for each ‘use’ of the product are often high due to the high administrative burdens. And as a large number of (chain) partners are involved in the complex material, information and money flows, there is an urgent need to establish a fluent operational payment infrastructure.

Bundles is such a circular company that tries to cope with all these challenges. The company offers clean laundry in a ‘hybrid use model’ in which the user pays 40 cents per wash on top of a fixed monthly fee. Ideally, however, Bundles would offer its customers a greater variety of prices for the use of short, long, cold or warm wash programmes, or the ability to differentiate between sustainable or unsustainable, loyal or flexible users. This way, sustainable use and maintenance of the washing machine can be even further incentivised.

The potential solution

To facilitate this need, Rabobank has set up a platform with the functionality of a virtual currency that allows for micro-payments and smart contracts for pay-per-use models. If this enables ‘real-time’ micro-payments at low transaction costs, Bundles’ circular ambitions can become a reality. Moreover, financing would become easier because payments are automated and more reliable… 

Follow the challenge virtually on www.circle-lab.com!

We also invite other entrepreneurs, financial institutions, blockchain experts, and other interested parties to contribute to this effort on Circle Lab, Circle Economy’s open-source platform for cities, businesses, and citizens to learn more about and engage with the circular economy. The contributions collected during the online challenge will bridge insights from the crowd with those of the CoP. If the pilot is successful it could be groundbreaking for Bundles, and therefore for the circular economy. 

Explore the Challenge

 


For more information about the CoP Blockchain for Circular Pay-per-Use: elisa@circle-economy.com

For press inquiries: melanie@circle-economy.com

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