Circular Economy, Blockchain Disruption Challenges

Global waste is projected to hit 3.4 billion tonnes by 2050, but blockchain and IoT are offering a smarter way forward. By tracing every product’s journey, from factory to recycling bin, these technologies could close the loop on waste. Still, energy use, governance, and cost challenges threaten to slow this circular revolution.

The present global economy is driven by non-linear economic models based on multiple technologies and energies that have a considerable number of dysfunctionalities and contradictions. 

We live in a world shaped by an original Marxist economic model that developed itself into a socialist centralised model, which coexists now with a (paradoxically) neo-liberal technology hyper-capitalist model. The current system is complex, fragmented, and deeply bipolar, something which affects most of the governments in practice.

Meanwhile, the market for the circular economy, defined as a system designed to keep resources in use for as long as possible- is projected to grow from around USD 638.6 billion in 2024 to about USD 2.2 trillion by 2034. At the same time, disruptive technologies like blockchain are scaling rapidly: for example, the global blockchain‑technology market is expected to reach around USD 1.43 trillion by 2030, having been estimated at USD 31.3 billion in 2024. 

The challenge is that all of these models are increasingly dependent on energies that are not sustainable and which are run by digital centralised technologies. The global economy, with all its paradoxes, is based on energies developed in the last 200 years (energies such as coal and oil). 

These are now processed and distributed by digital technologies that have been developed over the past 50 years. These are made of hardware and software tools that provide us with digital models of management and governance, applied to all kinds of processes running the most varied activities.

Over the past decade, the rhythm of change and disruption has grown to new heights due to the evolution of blockchain, AI and IOT.

Circular economy, sustainable innovation, IOT and blockchain.

The circular economy is a revolutionary shift in how industries think about resources. Unlike the traditional linear model, the circular economy seeks to keep resources in use for as long as possible, extracting maximum value while they are in use. After a product’s life, the goal is to regenerate products and materials for future use, reducing waste and conserving resources.

Now, while the principles of the circular economy are promising, the shift requires substantial innovation, particularly in technology. That’s where blockchain, AI, and the Internet of Things (IoT) come in. Together, these technologies can provide the infrastructure needed for a circular economy.

Blockchain, with its distributed ledger system, offers transparency and accountability. In a circular economy, the ability to track the lifecycle of a product—from creation to recycling—is crucial. Blockchain ensures that every step is recorded and verified, providing trust among stakeholders and preventing fraud or mismanagement. This technology can play a significant role in creating a trust economy, where transactions and resources are tracked in an immutable, transparent system.

Furthermore, blockchain’s ability to decentralise control could break down some of the power structures that have led to corporate monopolies and over-centralisation of power. With AI and IoT, blockchain can also enable more efficient and automated systems for tracking resources and products across industries.

Together, these technologies hold the potential to reshape the global economy and drive a transition to a sustainable, circular model. However, there are substantial challenges ahead, especially when considering the management of these technologies and ensuring that they are used for decentralised, ethical purposes rather than centralised control by large corporations.

Blockchain considerations regarding 360 multi-sector areas. 

Blockchain is rapidly becoming a disruptive force across numerous sectors, touching nearly every aspect of society. From digital transformation to education, finance, and government, the potential applications are vast.

Blockchain and digital transformation: One of the most significant areas where blockchain is making an impact is digital transformation. The technology offers businesses the chance to reinvent their operations by offering transparency, eliminating intermediaries, and reducing inefficiencies. This is especially important for industries like finance, where blockchain can reduce the cost of cross-border payments and improve security.

Blockchain education: As blockchain technology continues to evolve, there is a growing need for education in this space. Educating individuals and organisations about blockchain, its potential uses, and its complexities is essential for widespread adoption.

Blockchain and financial inclusion: Blockchain could become a game-changer for financial inclusion. By enabling cheaper, faster, and more secure transactions, blockchain technology has the potential to bring financial services to the underserved populations of the world, particularly in regions where access to banking infrastructure is limited.

Blockchain and government: Governments too can benefit from blockchain. The technology can help with public sector transparency, reduce corruption, and improve citizen engagement. However, governments must tread carefully, balancing the benefits of decentralization with the need for regulation.

Blockchain and the challenges of digital transformation

While blockchain offers numerous advantages, its adoption is not without significant hurdles. One of the primary challenges is scalability. Blockchain, as a technology, can be resource-intensive, especially when it comes to processing large volumes of transactions. The added computational overhead of using blockchain, especially in real-time systems, can become a barrier to its widespread implementation.

Another major concern is security. While blockchain is considered inherently secure, the broader ecosystem that supports it, such as wallets, exchanges, and third-party platforms, has proven to be vulnerable. As with all digital technologies, hackers continuously seek ways to exploit weaknesses, and blockchain is no exception.

Moreover, the very decentralised nature of blockchain presents its own set of governance issues. Who is responsible for regulating or overseeing blockchain systems when no single entity holds authority? This raises questions about data privacy, jurisdiction, and governance, issues that will need to be resolved as blockchain technology continues to mature.

Lastly, the cost of implementation is still a significant barrier for many organisations. While blockchain has the potential to reduce operational costs in the long term, the initial investment can be high, especially for smaller businesses. The complexity of integrating blockchain into existing systems also presents another challenge.

Circular economy, blockchain and new operating models

Blockchain has the potential to reshape business models, particularly in industries that are deeply entrenched in linear economic systems. Sharing economy businesses, in particular, stand to benefit from blockchain technology. For example, blockchain can enhance the operations of companies like Uber, Airbnb, and ZipCar, allowing them to more efficiently match supply with demand and facilitate transactions in a secure, transparent way.

The most significant advantage blockchain offers these organisations is decentralisation. By removing intermediaries, blockchain enables peer-to-peer transactions that are more efficient, cost-effective, and secure. This could dramatically reduce the overhead costs that currently hinder sharing economy platforms, making them more sustainable in the long term.

However, for this vision to become a reality, organisations need to understand the importance of digital transformation. This requires adopting a tech-first mindset, leveraging blockchain not just for cost-cutting, but as a core operating system that drives new business models and revenue streams.

Blockchain and the future of digital identity

One of the most exciting prospects of blockchain is its ability to revolutionise digital identity. In the current digital age, managing and protecting identity has become a significant challenge. Blockchain offers a potential solution by providing a secure, decentralised method of storing and managing digital identities.

For example, blockchain can enable individuals to control their own data, deciding what information to share and with whom. This could eliminate the need for passwords and traditional authentication methods, creating a more secure and private online experience.

Companies like ShoCard and Onename are already exploring this space, using blockchain to create self-sovereign identities. These identities would allow users to have full control over their personal information, reducing the risk of data breaches and identity theft.

Blockchain, IoT, and the circular economy

The Internet of Things (IoT) is another technology that, when combined with blockchain, can drive the circular economy forward. IoT devices, such as smart appliances, cars, and sensors, can communicate with each other and share data through the blockchain, creating a seamless ecosystem of interconnected devices.

For example, smart fridges could negotiate with the blockchain to sell excess energy back to the grid, or cars could trade road space with each other, all without the need for a centralised authority. This peer-to-peer system would reduce the reliance on traditional, centralised infrastructure, leading to greater efficiency and sustainability.

The path ahead

Blockchain has the potential to be a game-changer for the circular economy. By enabling transparency, reducing transaction costs, and decentralising control, blockchain can help create a more sustainable, ethical, and efficient economy.

However, the transition will not be easy. Scalability, security, and governance challenges must be addressed before blockchain can fully realise its potential. Moreover, the question of whether blockchain will be used for decentralised or centralised purposes will have a significant impact on its future.

The journey towards a circular economy, powered by blockchain and other disruptive technologies like IoT, will require a collaborative effort between governments, corporations, and individuals. But with the right vision and governance, this transition could herald a new era of sustainability, fairness, and innovation.

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