Media coverage of the digital currency Bitcoin has inflated along with its value during the past year. At the time of writing, one Bitcoin was worth more than £7,800, up from around £650 a year ago. By the time you finish reading this article, it could be worth double that or the bubble may have burst.
Whether you think Bitcoin – and other crypto-currencies such as Ethereum and Lite Coin – is a flash-in-the-pan or not, a number of waste management companies are in the vanguard of this digital revolution. Trade in waste using Bitcoins has already begun and it could be highly beneficial.
Beyond paying for shipments and waste contracts, the technology is being used to change other aspects of the industry. Within the past few months there have been ‘world first’ claims by UK companies using crypto-currencies for a deposit return scheme and an energy-from-waste venture.
The technology may still baffle some (see box) but, in essence, crypto-currencies are a decentralised way of transferring money. There are no banks and no government can influence their value by printing more money. Instead, any private individual is able to join a network and take part in running the system, which logs and verifies each financial transaction.
Despite the many potential drawbacks, there is one huge advantage: with no banks, there are no bank fees.
The first two syllables of crypto-currency refers to cryptography. The system could only work if it is nigh-on impossible for hackers to get in and wreak havoc, and this is where blockchain technology comes in.
A blockchain is an encrypted list of transactions or data held on a public network that cannot be altered and exists in perpetuity. Before any entry can be made, it has to be checked simultaneously by every individual computer on the network.
Any information can therefore be kept securely. Blockchains can be used for just about anything, not just currency. The Ethereum blockchain, for instance, has expanded into business contracts and voting as a way of running a virtual company. Some economists say the technology could end up transforming the way society itself is run.
In December, Kent-based facilities and waste management company Prismm Environmental bought several loads of paper from Parry & Evans in north Wales using around $20,000- worth of Bitcoins. It is probably the first transaction for waste using the currency in the UK.
Managing director Mike Jackson said: “It helps us in that it is instant – we did it on the train. There are no bank fees. It was just very easy.” But persuading customers to use Bitcoin has been difficult.
“It was new to them,” Jackson said. “Once they had an idea of what it was all about, they were up for it. I have tried to convince people abroad because I think that’s where the main advantage will come from in terms of saving banking fees.”
But there is a cost involved. Unless you spend the time mining your own Bitcoins, you have to buy and exchange them on the open market.
“It depends on the exchange you use; there is usually a $10 (£7.40) fee for transferring money into an exchange,” Jackson said. “From there, it is something like 0.16% of the transaction. If you exchange through wallets it doesn’t cost anything.
“Usually, it can cost us up to £30 for each transaction. If you take a rough figure of five customers each month, then it’s just under £2,000 a year. ”
The soaring value of Bitcoin has been a barrier. No-one wants to trade in a volatile currency and, at the moment, there is no incentive for customers to pay in Bitcoin – they would rather keep them in case the value keeps going up.
Jackson said: “Unfortunately, I don’t think this is going to become the way of paying because of that reason. Bitcoin has become something that it wasn’t designed for, and that’s an investment. It’s a bit bonkers.”
For Jackson, blockchain technologywill prove more important for the waste industry, and could make systems such as edoc waste transfer notes cheaper and completely secure.
He said: “Any kind of weight that is taken of a bin or a skip, a load of paper or plastic that could be linked into blockchain technology gives a completely unfraudulent piece of information that is open only to the people who need to see it.”
Thanks to new regulations in the shipping industry, a variety of forms on paper and email have to be filled in to verify the weight of containers, and it can be a costly affair. If a weighbridge was linked to a blockchain system, ports could access the data directly.
Jackson added: “If they can do that, there is no reason why the Environment Agency can’t do it with the annex VII forms for international shipping of waste. You wouldn’t need a piece of paper in the back of a container any more.
“I think that, in 10 years’ time, nearly all shared information will be going through a blockchain.”
One venture launched by the Blockchain Development Company in November, RecycleToCoin, is a deposit return scheme for plastic bottles and aluminium cans. It is starting on a small scale, with a few charity shops offering the service. A customer bringing back a can or bottle will be rewarded with the coins, which they can then transfer into Bitcoin or donate to a recycling charity.
US firm 4NEW is looking to build energy-from-waste (EfW) facilities at Sheffield, Newcastle and Hertfordshire funded through an initial coin offering called Kwatt, which is based on Ethereum. In this case, the Kwatt is a way of raising capital.
The scheme has raised a few eyebrows in the EfW sector. Keith Riley, a partner at partner at EnergyGap, said: “The whole financing structure is predicated on whether or not people have confidence and I think that will take some doing. They claim to have raised $25m, but will need 20 times that to start what they are suggesting.”
Of course, there is also a dark side to the crypto-currency phenomenon. Because payments can be entirely anonymous, there is evidence they are being used to fund serious criminal activity including drug dealing and terrorism.
The Treasury has taken notice and is planning legislation to regulate crypto-currencies in order to crack down on money laundering and funding of terrorism. How this will affect legal trade is not yet known.
Beginner’s guide to bitcoin
Bitcoins were invented in 2009 by Satoshi Nakamoto, about whom almost nothing is known. They are created by a computer joined to the network carrying out a fiendishly difficult task.
Once complete, a certain amount of Bitcoin is awarded and that computer is used to verify a transaction on the network. This ensures the democratic nature of the network – no single user can dominated. The process is known as mining.
Payments can be made through digital wallets, which are a series of codes which can be kept on anything from a laptop to mobile phone, memory stick or even paper. Cashpoints in some countries including Japan and the Philippines can exchange Bitcoins for local currency.
Although it is a secure system, coins can be lost. Welsh IT worker James Howells lost 7,500 Bitcoins held on a hard drive he mistakenly threw away. The drive is thought to be in a landfill, and Howells is trying to convince his council to search for it by offering a reward of millions.
At current prices the cache is worth around £59m.
But there are two major drawbacks in the way Bitcoin was set up. First is the worldwide computing power needed to keep the blockchain running, which has been estimated to eat up more electricity than Ireland.
Second is the fact that there is a cap of 21 million Bitcoins that can be mined.