Can a Crypto-Driven Circular Economy Build Us a Sustainable Future?

The dream of a better tomorrow always seems just a little out of reach for humanity. Sometimes, it feels like for every step we take in a good direction, we go two steps backward. According to 2024’s Sustainable Development Report, only 16% of SDG targets will be accomplished by 2030.

It’s becoming extremely clear that building a better future is going to take a lot more effort than initially thought. It’s in this context that the idea of a circular economy holds some promise. Optimizing the way an economy works for super-efficiency can be just what we need to lay the foundation of long-term change.

How Does Cryptocurrency Factor Into The Picture?

We’ll be discussing what a circular economy is later, but we first need to understand how crypto and blockchain come into play.

One of the most important requisites for a successful circular economy is the incentivizing of circular behavior. Crypto is a fantastic way to achieve this. As with any new venture, attracting investors is key. When you are talking about economies at scale, streamlining transactions along with scalability becomes a high priority.

Did you know that cryptocurrencies come with surprisingly high market capacities? As Binance notes, coins like XRP have a market cap of about $33.31 billion as of September 2024. According to data from Binance, this puts it in the top 10 list of the largest cryptocurrencies in the world.

XRP is also one of those coins that positions itself as a complement to traditional banking rather than a rival or a replacement. This makes it a little easier to fit into existing structures when trying to build a circular economy.

Remember, institutional investors and those with the power to push for a circular economy do pay attention to these factors. The streamlined efficiency of crypto and its large market cap is one of the many strengths that make it a prime candidate for circular economies.

What is a Circular Economy?

The core concept here is to ‘close the gap’ in terms of resource usage. Currently, much of our world is designed in such a way that once resources are used, they are disposed of. A circular economy aims for the creation of a closed loop where the wastage of resources is minimized as much as possible.

Unfortunately, the global circularity rate isn’t looking all that great. Instead of increasing in circularity, we have sadly decreased. Data from The Circle Economy, a firm that tracks circularity, notes that from 9.1% in 2018, we dropped to 7.2% in 2023. In this five-year span, we used 500 billion tons of materials. That’s as much as the world did in the entirety of the 20th century.

At the same time, we know that the benefits of increasing circularity aren’t limited to sustainability. The World Economic Forum notes that a transition could lead to an extra $4.5 trillion in economic output. That’s a bonus that no economy wants to pass on. Now, combining the abilities of blockchain with a circular economy in the pursuit of a sustainable environment unlocks many benefits.

It Unlocks the Benefits Of Tokenizing Key Economy Assets

You see, the blockchain gives you the ability to tokenize assets, which makes it perfect for a circular economy. You could ensure that natural resources and valuable materials all have unique identities on a blockchain.

The implication is a far more transparent and traceable record of every resource and its usage. That includes its extraction, production, and the ideal goal of reuse or recycling back into the system. For instance, let’s look at the case of EV materials like lithium and cobalt. In our current economy, there’s a lot of ambiguity and moral gray areas in terms of where and how it gets mined.

A circular economy that uses crypto to track key economic assets is tough to mismanage by any party. You could hypothetically track and only accept materials from verified sources, which would cease support from sources plagued by human rights and environmental violations. It also reduces the likelihood of unexplained wastage or loss that current systems struggle to deal with.

Crypto Can Help Economies Even at the Community Level

At the end of the day, it’s people and their communities that make up any economy. Crypto’s benefits extend down to the individual member by incentivizing circular behavior at the micro level. It doesn’t have to be limited to big industries and factories. On the contrary, crypto can be used to create reward systems that take advantage of the precise resource tracking of blockchain.

We’ve seen this take place in Spain with the RECICLOS project and with ‘Plastic Bank’ in many countries. Without incorporating the blockchain, the average person doesn’t really know what happens when they recycle. However, as PlasticBank notes, this technology guarantees impact.

Users get assigned a unique ID, which allows the firm to track plastic from collection to recycling. At the same time, the individual can use their ID via a mobile app or website to view how their efforts are making a difference. Adding in cryptocurrency rewards for different milestones has the potential to make this process transformative.

All things considered, the very idea of a circular economy on its own is a fascinating concept. However, when combined with the power of blockchain and crypto, the advantages it poses significantly increase. It’s safe to say that we might be far closer to a real solution if this pairing of concept and technology is implemented with good intentions.