In recent years, countries have begun talking about becoming more environmentally friendly.
Brazil’s Green Initiative held its first meeting barely one year ago, discussing how to best push institutional financing toward funding green projects.
The EU put together a group called European Green Capital that has published a guide to making the EU sustainable by 2030, a “circular economy” action plan, and even things like roadmaps toward a European Green Deal.
China has used international forums to state its intention to decrease pollution, use fewer fossil fuels, overhaul its environmental regulations, and fund a “greener future”. China’s Vice Premier Lu went as far as to put pollution reduction at the top of China’s list of priorities this year at Davos. They say they’ll need somewhere in the range between 5 and 17 trillion EUROs to accomplish their environmental goals!
The U.S. is kicking around the idea of a Green New Deal which would legislate trillions of US Dollars toward climate and sustainability initiatives over the next decade. The resolution failed to pass in the U.S. House of Representatives last March, but it’s hard to deny the rising pressure to ensure a green future in North America.
What do all of these initiatives have in common? They’re all talk and no action. All sorts of roadmaps, papers, action plans, committees, legal documents, bills, and proposals. And very little to show for it.
Terry Shane is taking matters into his own hands! Terry is a long-time IOTA community member. He’s been very involved with IEN, and his talk at the Blockchain Opportunities Summit in 2018 entitled 100 Billion Reasons Why has become famous within the community. It’s a watch that comes highly recommended:
Terry was back at it again on June 4 with an enthralling sequel to his original masterpiece. He has appropriately titled the newest talk 600 Billion Reasons Why – which focuses on his newest IOTA-based recycling project.
When we say 600 Billion Reasons Why is the best presentation you’ll see this month (or maybe this year, depending on how many presentations you consume?), we mean it. Terry is a master communicator, and he’s speaking about a project that he has clearly thought about extensively.
We’ve set the reader up with all necessary introduction to the talk, and have intentionally avoided spoiling any of the content of the talk to this point in the article. This talk is so important that we aren’t going to summarize it here. We’re going to provide our full interpretation/pseudo-transcript. Our recommendation is to watch the presentation in its entirety, and then continue reading this piece for a recap of what you’ve just watched. It’s a presentation that’s too important to not be on your radar, and thus too important to summarize in a pithy article:
Hopefully you’ve basked in the glory of Terry’s great presentation, and now you’re back to let it percolate while reading a rough transcript of what you’ve just witnessed. Let’s go.
A couple years ago he was enjoying his morning vanilla latte in a neighborhood coffee shop, Terry saw that in the back of the store was a recycle bin. It had the traditional three openings: paper cups, cans, and other paper. Customers were invited to participate in the recycling process with this bin prominently positioned. Nearly everything being sold in the store involved a cardboard cup with its attendant plastic lid printed with the three arrow recycle logo.
But, when he looked inside the recycle receptacle, there was only one plastic bag!
“The recycling initiative was an illusion”
When he talked to the manager, she said that the property manager at that location didn’t provide any recycling options. The cups thrown in the recycling receptacle not only got tossed into the same bin, but they were all thrown away and put into a landfill!
That got him thinking about a problem he’s seen around the world. Single use hot and cold cups made from high quality long-fiber paper that are tossed away by the billions. Usually used for coffee and cola.
He says that this is “emblematic of how we need to change consumer behavior to clean up the mess we’ve created”
“In reality, this is a complex ecosystem problem that involves many players … the problem is tailor-made for IOTA to solve”
First, let’s understand the core business issues at fault here that prevent existing business practices from addressing the problem:
Most paper cups are coated with a thin plastic lining. Sometimes even double coated (inside and outside for external condensation). This makes recycling more difficult. However, the technology to recycle these products does exist. The UK has the capacity to recycle every single cup that’s produced. It just doesn’t make financial sense.
New compostable and bio-degradable cups sound great in theory. So do reusable and refillable cups. However, in practice, these cups have a larger carbon footprint to produce than paper cups, and regardless of how great these sound on the surface, in reality almost none are used as intended. They’re thrown away like every other cup. On top of this, COVID has eliminated reusable and refillable cups from being a viable option.
Terry contends that COVID has relegated reusable cup initiatives to being “quite literally off the table for the near future”
The need is for greater focus on extended producer responsibility and reliable markets for recycled cup fiber.
His solution, which comes out of his company called bIOTAsphere, inverts existing logic by focusing on the far-end of the cup life cycle and creates a lucrative market in which every player in the ecosystem wins.
“IOTA makes this possible.”
The size of the problem is enormous. 600 billion single use disposable cups are manufactured each year. 100% can technically be recycled, but 99% are NOT recycled, and are put into landfills instead.
Local governments have been trying to change behavior by charging for the use of cups to dis-incentivise people from using paper cups. Unfortunately these attempts are likely to fail because they do nothing to change consumer recycling behavior. The increased cost of a few cents will just become a new normal that gets built into the price of the beverage.
Why does cup recycling not work today? It’s a complex ecosystem with multiple players: Cup manufacturers, retail outlets, waste collectors, pulp and paper mills, consumers, municipalities. All have misaligned incentives and pull in vastly different directions.
It all starts with the cup. Today it costs MORE to make cups with recycled fiber than it does to use new virgin fiber. Most companies won’t take a chunk out of their bottom line by paying more without receiving compensation in return.
Therefore, the price of not recycling is borne by the long term general public. This is called an externality in economic jargon.
In economics, an externality is the cost or benefit that affects a third party who did not choose to incur that cost or benefit
Technically, you can make cups with 40% recycled fiber without structurally compromising them, but none of the big companies will buy them, so instead we keep cutting down trees. We need to find ways to make recycled cheaper than virgin fiber.
For a retailer, cups are simply a cost of doing business. There’s no reason to buy anything other than the cheapest option that’s still capable of doing the job. Starbucks is the industry-leading green-friendly brand in using recycled products, using 10% recycled fiber. Starbucks is an extreme exception rather than the rule.
But even if cups are collected in their own store, then waste management is typically handled by the store’s property management. Disposal is out of the store’s hands.
Consumer: 80% are taken to-go. The actual burden of recycling falls to consumers where they’ll be finishing the product outside of the store from which they bought the cup. One recycling bin might say it takes paper cups while a similar bin around the block says that it doesn’t. But the real problem is illustrated when you take a peek inside these bins: there’s all sorts of things – garbage, paper, glass, plastic. Cross contamination makes the whole effort worthless. We’re in a hurry, so we dump everything in there.
With no incentive or consistent recycling protocol, cups almost always end up in the land fill.
The UK has a saying that goes, “Minutes on the lips, but a lifetime on the tips”
Municipalities run the residential blue bin programs. But they consider cups garbage! So, toss one cup in the bin and the whole load ends up in the landfill. Why? It costs more to separate the cups from the rest of the trash than you can sell the resulting fiber for, so it’s cheapest to treat it all as garbage. Cities across North America are abandoning their blue bin projects because the separation issue has gotten so bad! No matter who is in charge of recycling, these costs mean than the last person who touches it is almost always going to be incentivised to take the cheapest route by sending it to a land fill. This is what happens to 80% of what you think is being recycled.
Waste aggregator – Garbage is collected and taken to MRFs to separate waste. As was mentioned above, what they earn for the cup stock is less than what they would make off of successfully sorting and recycling those cups, so most end up going the cheapest route which ends up at the land fill.
It used to be that developing nations like China used to accept containers full of recycled materials from North America. Before 2018, China was handling nearly HALF of the world’s recyclable waste. When the Chinese enacted a 2018 policy called “National Sword“, it became illegal for China to continue importing recyclable waste from the rest of the world.
With this changing dynamic, the price that aggregators can earn for their recycled materials has plummeted. Only some pulp mills can process cups anyway, which means that they’re geographically spread out. That in turn means that there are high transportation costs which must be overcome to achieve financial alignment.
Pulp and paper mills – For the small percent of cups that make it through the recycle process and end up in a mill, there’s yet another problem. How do they know the contents of a half ton barrel of mixed paper? There’s no audit trail, and there’s no way to tell what’s on the inside without breaking them open or investing in expensive core drilling technology. Quality control is difficult. It’s not a profitable business, so there’s no rush to make more capacity. Even if you make new cup stock with recycled fiber, there’s still only limited demand from the cup producers.
So the system is broken.
Terry argues that if we can create value at the furthest end of the ecosystem, the economic pull would address every problem.
1 ton of used polycoat fiber delivered to a pulp mill sells for $30-$40. Prices went negative in Ontario in 2020. He asked pulp mills and aggregators what difference it would make to their business if they were paid $1,000 per ton to process paper cups.
“It would be transformative, and create a huge demand for cups upstream. Cups used for recycling would become highly valuable, and thus well separated. The resulting paper output could be sold to cup manufacturers at much lower rates than today.”
Terry reassures the viewer by saying “it sounds like an impossible aspirational dream,” but by turning the current model on it’s head, we can change the economics for every player in the system.
IOTA can make the entire system financially viable by using unique QR codes for each recyclable cup. This makes each individual cup its own economic agent that we can track on it’s journey through the cycle. The data about where it is in the cycle gives transparency to all participants up and down-stream.
Where will the money come from? A $0.25 deposit paid by the consumer at point of sale. But he stresses that this deposit is not paid to the retailer! It is assigned directly to the individual cup by a value transfer to its QR code IOTA address. Governments have already decided that a few tens of cents is about the right value for a deposit, and this amount is already built into the price of your drink.
Bring your own reusable cup to any retailer and they take off a couple tens of cents. Alas, less than 2% of consumers take advantage of this.
Deposits on wine and beer bottles are common in many places. Deposits are already charged on all sorts of products, and result in recycling rates of 85%+ are common. Deposit and refund schemes are proven to be effective around the world.
“None of this is rocket science or revolutionary!”
As successful as a few of these systems might be, these existing systems have no way of tracking individual items. They do little to reveal how much material makes it to recycling versus being returned, and happen to create a significant audit challenge. Money is collected in one place but refunded somewhere else.
For the first time, IOTA makes this entire process auditable, fraud resistant, and economically practical. bIOTAsphere is building an open public data commons solution that’ll be able to track individual cups from one end of the lifecycle all the way to the other end.
This is only possible using IOTA’s digital twins – QR codes printed on the side of recyclable cups printed at time of manufacture at essentially zero marginal cost.
bIOTAsphere handles these addresses and micropayments from end to end. bIOTAsphere will also make a KUPkrush unit: a reverse vending machine that only accepts cups with an active QR code and an active deposit. The machine is a touch-less dedicated device intended to be positioned near the end consumer. Scanning the cup initiates the refund. No personal ID required. The user would scan their own QR code to receive payment off of their phone app or a physical IOTA card in their wallet.
These cups received by the KUPkrush unit must be empty and clean. How do we determine if this is the case? Remember, the digital twin embedded into tangle metadata associated with the cup’s QR code knows how much that cup weighed at manufacture. So KUPkrush can weigh the cup, compare that to known original weight, and determine the cleanliness status along with fill status before awarding the deposit for its return.
The machine is ingesting cups and issuing refunds, AND getting paid for the data it produces. Additionally it’s paid every cup that it recycles. Terry predicts that individual ownership of these units will be highly profitable, encouraging more and more to be placed in highly trafficked areas. ROI of up to 100% within the first year is claimed.
Technology is important, but getting everyone onboard is an essential component. Standards and large scale buy-in are precursors to adoption.
Enter FISC – Food Industry Sustainability Consortium
FISC will be a non-profit foundation representing all the players in the ecosystem that we’ve talked about. Many members are competitors who need a level playing field, making it imperative that they have access a permissionless open solution (IOTA). Single location stores even need to be able to buy coded cups from cup makers and get a scanner without having to pay the fees to join a members only association. FISC will receive a reward for every cup that gets recycled, so it’s fully funded by the system it represents. FISC is at the center of our new circular economy.
NOW LETS SEE HOW THE NEW CIRCULAR ALIGNMENT WORKS
- bIOTAsphere issues bulk IOTA digital IDs
- Cup makers request batches via API
- A cup converter prints a unique QR code onto each new cup manufactured. Paper cups are already ink jet printed with a unique batch code, so doesn’t change anything or add cost in the normal manufacturing process.
- Data is associated with each ID as produced and sent to Tangle (size, weight, content, location, manu, cup design, etc.)
- At retail locations, cups are treated as they’re treated today. They have no value until they’re sold to an end user, so there’s no risk of creating recycling black markets as currently exists in unused cups.
- When a retail location sells to a customer, the cup’s QR code is scanned. A $0.25 deposit is charged as part of the purchase price (and optionally included as a line item on the receipt). Its important to understand the amount is immediately sent to the address belonging to the cup’s QR code, and NOT held by the retailer. This is the first difference between this solution and previous solutions. It eliminates all of the audit and fraud issues with those solutions.
- In the scanning process, additional metadata is recorded: retail chain, store ID, geo-code, timestamp, etc.
Note that we don’t want to know anything about the consumer at all. We can’t expect stores to take on this marginal scanning cups and handling deposits for free. Scanning the QR on the cup and transferring the value will be rewarded, but that reward is only released when the cup is later ingested by a KUPKrush.
In addition to the pending $0.10 reward for the customer, both the retailer and the cup maker have pending rewards that only get released at the next stage.
When the cup is ingested by KUPkrush, refunds are released to the manufacturer, the retailer, and the consumer. There’s still part of the deposit remaining. Since IOTA is fee-less, there’s no loss in value to a middle man. All sorts of knock on effects stem from this, most brilliantly the customer who forgoes properly recycling their cup at a KUPkrush, throwing it away instead, will mean that cup still has value. Anyone can collect that cup, submit it to a KUPkrush, and claim the reward. Remember, the value goes to whoever recycles it!
The machine makes a “brick” with every 500 paper cups, and each brick has its own digital ID (just like every cup has its own digital ID). The machine receives a 5 cent reward in return for every cup it processes. Owning one of these things will be extremely profitable, so he expects property managers and local governments to deploy these machines in an effort to grow their revenue streams. The KUPkrush can monitor its own capacity and report it over the network which will be monitored by collection agents.
Collection agents – Rewarded 3 cents per cup, or $15 per brick that they empty. Collection agents would scan the brick ID and replace it with a new empty bag with a new brick ID. Like the previous steps in the cycle, the brick reward will not be paid to the collection agent until it has been scanned at the downstream waste aggregator, so now you’ve got the collector needing to get it to aggregators.
Terry imagines a whole gig economy forming around the need to service these KUPkrush machines. Mail routes and ridesharing routes might well be shaped by KUPkrush locations.
Collectors will bring their bricks to an aggregator who scans the brick, at which point the collector gets their reward. Bricks are compacted and strapped into “bales” containing 50,000 cups each. Each bale has a unique bale ID which contains details about each brick, and therefore data on every cup in the bale. They’ll get $500 per bale when it reaches the pulp mill. AND the aggregator didn’t have to spend their time and money separating out materials like they do now since everything in the bricks has already been vetted earlier in the cycle by KUPkrush. Aggregators are getting verifiably single stream, uncontaminated cup stock. In other words its high quality fiber that’s not only desirable from an environmental standpoint, but hugely valuable … but only when it arrives at a pulp mill.
So after transport to the mill, the bales are scanned. Mills no longer need to invest in expensive core drilling technology for quality control on these bales since every single cup in the bale can be individually audit traced all the way back through the recycling process. The mill already knows about the weight, construction, and fiber content of every single one of those 50,000 constituent cups. And they, too, receive 1 cent for every cup they recycle. That’s $1,000 per ton of material. They’ll have great reason to be searching for all the cup stock they can possibly find. For this amount of money, mills that don’t currently have the tech to process cup stock will seriously consider making the required investments to compete in this lucrative market. The resulting increased supply of material will drive down the cost of recycled fiber, making cups that use recycled fiber … cheaper.
Since even the best recycling initiatives can only achieve rates of around 80%, let’s assume a conservative 20% recycle rate at the start of a local bIOTAsphere initiative. For all of the cups not recycled, a smart contract will release the deposit on that cups IOTA address after an arbitrary amount of time. Half of that money will be directed to the local government where that cup was sold, so in a worst case scenario in which recycling rates are poor, the municipality will receive more funding.
Terry’s hope for a pilot project:
Target market is Toronto, or any metro area with ~3 million people. That many people consume about 600 million coffee cups used per year, and ideally 10% of those would be consumed in the downtown core. The pilot program would focus on the densely populated downtown core, so that’s 60 million cups to be printed. Assuming 1 in 5 of those cups make it to one of the 100 KUPkrush units, the numbers look very promising. Again, even if totally unsuccessful, the city receives a sizable income from the cups not recycled.
If bIOTAsphere is successful, it returns $3 million to its investors in only the pilot.
North America’s potential consists of 120 billion cups, and global potential is 600 billion cups.
“That’s how we turn $0.25 into a $30 billion opportunity in North America, and a $150 billion opportunity globally”
At this point, the video entered into a Q and A session moderated by David. A bunch of community questions made their way into the chat:
Terry says that once this ball starts rolling, it’ll pick up steam. He’s already had many conversations and received very very positive feedback from mills, cup manufacturers, waste managers, and associations.
The biggest question he always gets is, “why would the big retailers get on board with this?” His answer is that they can’t afford NOT to. They know just how big of a problem discarded cups are, and they know that not pursuing a viable solution like this one might force an ultimately undesired solution to be imposed onto them. Being cast as a global polluter also isn’t good for a brand, and the first company to jump on board will have a first mover advantage. And they get to make money too.
Hans probably speaks for the majority of the IOTA community: