Conference PaperPDF Available

Blockchain-based Smart Contracts in Waste Management: A Silver Bullet?

Authors:
  • HU University of Applied Sciences Utrecht
31ST BLED ECONFERENCE: DIGITAL TRANSFORMATION: MEETING THE CHALLENGES
JUNE 17 - 20, 2018, BLED, SLOVENIA, CONFERENCE PROCEEDINGS
A. Pucihar, M. Kljajić Borštnar. P. Ravesteijn, J. Seitz & R. Bons
Blockchain-based Smart Contracts in Waste Management:
A Silver Bullet?
GUIDO ONGENA, KOEN SMIT, JARNO BOKSEBELD, GERBEN
ADAMS, YORIN ROELOFS & PASCAL RAVESTEIJN
25
Abstract Blockchain technology may have the potential to fundamentally
change society and we might currently witness the dawn of a
cryptographically secured trust-free transactions economy. One relatively
unexplored application domain is waste management. Incorrect waste
management practices may lead to illegal pollution or enable fraudulent
transactions. Using a design science approach, we formulate problem areas
and evaluate the applicableness of using a blockchain solution to mitigate
the problems identified. Our results indicate that it is important that the
organization and its infrastructure is prepared for the use of blockchain.
There are several conditional challenges that must be overcome to realize
blockchain technology’s full potential. Further research is needed in order
to grasp a full understanding about the situations in which blockchain
technology is beneficial or not.
Keywords: Blockchain • Smart contracts • Waste management •
CORRESPONDENCE ADDRESS: Guido Ongena, Ph.D., Senior Lecturer/Researcher, HU University of
Applied Sciences Utrecht, The Netherlands, e-mail: guido.ongena@hu.nl. Koen Smit,
Lecturer/Researcher, HU University of Applied Sciences Utrecht, The Netherlands, e-mail:
koen.smit@hu.nl. Jarno Boksebeld, student, HU University of Applied Sciences Utrecht, The
Netherlands, e-mail: jarno.boksebeld@hu.nl. Gerben Adams, student, HU University of Applied
Sciences Utrecht, The Netherlands, e-mail: gerben.adams@hu.nl. Yorin Roelofs, student, HU
University of Applied Sciences Utrecht, The Netherlands, e-mail: yorin.roelofs@hu.nl. Pascal
Ravesteijn, professior, HU University of Applied Sciences Utrecht, The Netherlands, e-mail:
pascal.ravesteijn@hu.nl.
DOI https://doi.org/10.18690/978-961-286-170-4.23 ISBN 978-961-286-170-4
© 2018 University of Maribor Press
Available at: http://press.um.si.
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G. Ongena, K. Smit, J. Boksebeld, G. Adams, Y. Roelofs & P. Ravesteijn: Blockchain-based Smart
Contracts in Waste Management: A Silver Bullet?
1 Introduction
The design of bitcoin was first described in a self-published paper by Nakamoto in 2008
(Nakamoto, 2008), after which an open-source project was registered on SourceForge.
Propelled by its capricious quotation, the bitcoin received tremendous media attention
recently. It is difficult, if not impossible, to open a popular publication today, and not run
into a reference to bitcoin, cryptocurrency or some combination thereof. The bitcoin was
the first attempt to solve the double-spending problem in the context of digital currency
by means of blockchain technology.
Blockchain technology, often referred to as distributed ledgers, is the underlying
technology that stores the same information at different nodes and the information will
only be added when the nodes have reached consensus. New transactions can be added,
but previous information cannot be removed enabling all nodes to track the history. This
reduces the dependency on a central actor and the risk of manipulation or system failure
as all nodes have all the information available (Ølnes, Ubacht, & Janssen, 2017). Beyond
cryptocurrencies like bitcoin, blockchain technologies may have the potential to
fundamentally change society and we might witness right now the dawn of
cryptographically secured trust-free transactions economy (Beck, Czepluch, Lollike, &
Malone, 2016). It is this potential disruptiveness that the venture capitalist Marc
Andreessen (2014) even coined as the most important invention since the advent of the
Internet.
The potential beneficiaries triggered many organizations to experiment with this
technology. In 2016 alone, 26.000 new projects were started with this technology as a
basis (Trujillo, Fromhart, & Srinivas, 2017). Recent literature, for example, describes
implementations for the insurance market (Hans, Zuber, Rizk, & Steinmetz, 2017),
crowdlending platform (Schweizer, Schlatt, Urbach, & Fridgen, 2017), and digital crime
prevention (Smith & Dhillon, 2017). These instantiations are primarily situated in the
private domain. It is however stipulated that blockchain technology is also a tool to
increase efficiency and economic growth (Chapron, 2017). There is thus a need to address
and learn from governmental initiatives to seek the blockchain’s potential in this context
(Ølnes, 2016). The aim of this study is to contribute to a discussion about blockchain in
a governmental setting by exploring the potential use of blockchain and to provide a
nuanced view of its use in the field of waste management in a Dutch municipality. This
also fills the gap of the need to inquire the use of blockchain in the domain of waste
management as Saberi, Kouhizadeh, & Sarkis (2018) stipulate. Or to paraphrase the
authors: “move beyond the hype to make this technology a productive tool for society”.
Waste has always been generated due to human activities. Waste hasn’t been a major
issue as the human population was relatively small and nomadic. It, however, became a
serious problem with urbanisation and the growth of large conurbations. Poor
management of waste led to contamination of water, soil and atmosphere and to a major
impact on public health (Giusti, 2009). Concerns about lack of controls, inadequate
legislation, negative impact on the environment and human health were triggered due to
31ST BLED ECONFERENCE: DIGITAL TRANSFORMATION: MEETING THE CHALLENGES
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G. Ongena, K. Smit, J. Boksebeld, G. Adams, Y. Roelofs & P. Ravesteijn: Blockchain-based
Smart Contracts in Waste Management: A Silver Bullet?
several serious and highly publicised pollution incidents, for example, see the work of
Triassi, et al. (2015). These incorrect waste management practices forced many national
and federal governments to introduce new regulatory frameworks to deal with hazardous
and unsustainable waste management operations. According to the United Nations, waste
management entail activities including (a) collection, transport, treatment and disposal of
waste, (b) control, monitoring and regulation of the production, collection, transport,
treatment and disposal of waste and (c) prevention of waste production through in-process
modifications, reuse and recycling (United Nations, 1997). The latter will not be taken
into account in this study. In this study, we evaluate the applicability of blockchain
technology in the domain of waste management in the area of Utrecht, the Netherlands.
To do so, we address the following research question: How can blockchain technology
be utilized by municipal bodies to process transactional waste management data?
2 Blockchain: distributed ledgers
Blockchain is an ongoing growing list of registrations of transactions that are divided into
blocks. Every block refers back to the last block which shapes a chain, hence the name
blockchain. Iansiti & Lakhani, (2017) describes it as: “an open, distributed ledger that can
record transactions between two parties efficiently and in a verifiable and permanent
way”. The main idea is that the information that is contained in a block is verifiable and
permanent as it’s impossible to change or mutate.
Blockchain offers new possibilities for controlling and sending information in, for
example, a supply chain. However, when trust and robustness are no issues for an
information system then blockchain is not always favorable to a traditional database
(Greenspan, 2016). There are several differences between the traditional way and new
methods developed on blockchain technology. Table 1 summarizes the advantages and
disadvantages of blockchain technology versus traditional database systems.
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G. Ongena, K. Smit, J. Boksebeld, G. Adams, Y. Roelofs & P. Ravesteijn: Blockchain-based Smart
Contracts in Waste Management: A Silver Bullet?
Table 1: Blockchain vs. traditional database system
Advantages of the blockchain technology
Blockchain can prove the authority and validity of its own transaction instead of
using a central administrator that has to validate and take responsibility.
Transactions through a Blockchain can, therefore, be fully automated independently
and verifiably executed (Swan, 2015).
Blockchain, just like any other (database) system, has to be run on physical
hardware. However, unlike other systems, there isn’t any owner since it’s physically
impossible for a Blockchain to run on 1 node. In this case, there isn’t any single
entity that has the power to change or mutate any information that’s stored in the
Blockchain. This means that a blockchain is less sensitive to corruption or fraud. By
effect, this means that the parties involved in the Blockchain can all trust the
information stored in such a way.
Information stored in a Blockchain is transparent for all parties involved. There’s
always a way to check the history of all the transactions in a Blockchain. This also
means that audits for a Blockchain system are easier and always reliable
(Underwood, 2016; Atzori, 2015; Swan, 2015).
The data isn’t stored in a single location. So there is not one person responsible for
the security surrounding the data. That means that there isn’t any need for a security
specialist that has to take responsibility for the database and govern and proof the
integrity of the data (Ølnes, 2016; Underwood, 2016; Gervais, et al., 2016) .
Because of the inherent technology of Blockchain, there is a very low risk of system
failures. Blockchain has a much higher robustness compared to tradition database
system because it’s run on multiple systems in multiple locations. If one node fails
or breaks down the other nodes will take over instantly. There is no extra
configuration or actions required because each node has a copy of the whole
Blockchain. This also means there is no expensive backup system required. (Ølnes,
Ubacht, & Janssen, 2017)
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Smart Contracts in Waste Management: A Silver Bullet?
Disadvantages of the blockchain technology
Blockchain is always slower than a traditional database system. In theory, it’s also
always more expensive because it costs more energy, hardware and infrastructure
capacity (Eyal, Gencer, Sirer, & van Renesse, 2016).
For every new request regarding a new peer-to-peer connection, there also has to be
proof of the validity and integrity of the source. This is done by a digital signature.
This means that for every new connection it’ll take more time and computing power
compared to the traditional database systems where you can send information
instantly (Gaetani, et al., 2015).
Blockchain technology intends to work on the basis of a consensus between parties.
A transaction will only be authorized if at least 50% of the nodes validate the
transaction. This process takes time because each working node needs to
communicate to other nodes to check for a verdict. This will take considerably more
time depending on the size of the Blockchain and the quality of the infrastructure.
Blockchain's main strength is based on how many different nodes and unique parties
are involved. The more different nodes the stronger the blockchain is. A traditional
database system doesn’t require such a scale (Gaetani, et al., 2015).
Blockchain has to validate and authorize each transaction but for each transaction,
there are heavy calculations involved because it is encrypting all the information,
with a traditional database system it’s possible to skip this and therefore gain much
more speed with less hardware and computing power involved.
It’s very difficult to expand the capacity of an existing blockchain (Ølnes, 2016).
This means that a blockchain system is less flexible. This has proved to be a problem
with the enormous growth of Bitcoin where the sheer number of users are causing
many problems (Filippi & Loveluck, 2016).
3 Problem Identification and Motivation
Our study can be best characterized as design science research (Hevner, March, Park, &
Ram, 2004) as a potential new artefact, represented by a blockchain solution, is the focal
point of the study. It, however, must be noted that there is no actual demonstrator build
during this research as this is research in progress. In line with common design science
approaches, our research starts with the identification and description of a practical
relevant problem (Peffers, Tuunanen, Rotherberger, & Chatterjee, 2007). To acquire
deeper knowledge about the process of waste management, interviews were held with
both the local authorities as well as the waste station.
Four key stakeholders are identified. The disposer, a mediator (usually the municipality
in this case, Utrecht), logistics and the processor (waste station). Naturally, the process
is triggered by a request from the disposer that notifies the municipality through a so-
called guidance letter. This letter is used by the driver to check its weight. Then the waste
is weighed at the waste station after which the waste is deposited. Thereafter, a weighing
note is sent, together with an invoice, to the mediator. This simplified process is illustrated
in Figure 1 by BPMN (OMG, 2011).
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G. Ongena, K. Smit, J. Boksebeld, G. Adams, Y. Roelofs & P. Ravesteijn: Blockchain-based Smart
Contracts in Waste Management: A Silver Bullet?
Figure 1: The process of waste management
Sharing of information in this process is digitally supported by an ERP-system. Data is
manually entered into the system. This results, for instance, in the guidance letter. The
process is governed by several stakeholders. NIWO is also a key stakeholder. The NIWO
is the licence provider for road transport in the Netherlands. A national governmental
body (ILT) that monitors the licenses of waste processors. Authorities on provincial level
who provides licenses to waste processors. Hence, several (non-)governmental bodies are
installed to monitor the process of waste management.
Based on the interviews, five main problem areas were identified. Table 2 provides an
overview of these deficits and provides a short description of how this can be exemplified
in the process of waste management.
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Smart Contracts in Waste Management: A Silver Bullet?
Table 2: Deficits in the current process
Problem area
Description
Fraud and manipulation
Payments per kilograms are made when getting rid of
waste. However, the local authorities cannot check the
number of kilograms as they don’t possess a weighbridge.
In the past, some flows of waste that generate a lot of money
were fraudulent. This was done by sharing incorrect
information that couldn’t be checked by means of a
weighbridge.
Wrong or loss of
information
Guidance letters and are physical papers that pass by all the
activities of the current process. In the process, these papers
sometimes get lost. It so happens that the papers literally fly
out of the window during transport or the wrong letters are
given on departure.
Manual processes
When implementing the ERP system, it was intended that
data such as the weighing tickets would be automated. This
wasn’t done. As a result, the employees of the municipality
must enter the data manually in the ERP system.
Lack of knowledge
about technology
Knowledge about, and the ability to work with, technology
is rather limited. As a result, the ERP system does not come
to fruition.
Lack of control
Periodic governmental inspection at the waste division
station takes a lot of time. Since the resources are limited,
data is not fully monitored
4 Field of Application: A Current Use Case
To strengthen our possible design, we draw on prior experiences. The Human
Environment and Transport Inspectorate (ILT) initiated a pilot a few years ago. The aim
of this pilot was to develop an improved process for the cross-border transport of waste
by means of blockchain technology (Donata, 2016). The reason for choosing blockchain
technology is that at the moment several parties have separate closed accounts and there
is not a plausible party that could (or would like to) arrange the administration process of
all parties involved. In other words, there is no trusted third party within the process. As
is shown in Table 2 this can cause problems in areas such as 'lack of control' and 'fraud
and manipulation'.
The working prototype of ILT has proven that blockchain works as the technology can
perform the tasks it has been given. It is, therefore, possible to implement a blockchain in
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G. Ongena, K. Smit, J. Boksebeld, G. Adams, Y. Roelofs & P. Ravesteijn: Blockchain-based Smart
Contracts in Waste Management: A Silver Bullet?
a supply chain such as waste processing. However, the pilot shows that it is difficult to
get everyone involved with the project. Some parties were very enthusiastic and
proactive, while others were totally uninterested. This is partly due to a lack of knowledge
about blockchain, or more generally a low IT maturity of the organisation influenced this
attitude as well. This ‘lack of knowledge about technology’ has also been identified in
Table 2 above. The branch of waste depositing is rather conventional and thus offline
communication still characterizes the process of sharing of information between parties.
This corresponds with two other possible problem areas that we have identified: ‘manual
processes’ and ‘wrong or loss of information’.
Hitherto, the pilot is still running. The project leader indicated that it hopes to achieve the
following benefits with the blockchain solution:
The ILT establishes a key position as they control accessibility to information;
They can then better map the waste flows and take action if needed;
Faster handling and fewer administrative burdens so that bank warranties can be
released earlier.
5 Discussion, and Implications for Theory and Practice
The working prototype of ILT has proven that blockchain works as a technology. It is,
therefore, possible to implement blockchain technology in a supply chain such as waste
processing. However, this study not only aimed to strive for the confirmation that a
blockchain solution is applicable; it strives for an evaluation whether a blockchain
solution is beneficial compared to the current situation, as proposed by Gregor and
Hevner (2013). Thus, reflecting on the problem areas in the process of waste management
(as depicted in figure 1) and the characteristics of the blockchain technology and whether
the latter is beneficial to the deficit. The results and corresponding explanations are
illustrated in Table 3.
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G. Ongena, K. Smit, J. Boksebeld, G. Adams, Y. Roelofs & P. Ravesteijn: Blockchain-based
Smart Contracts in Waste Management: A Silver Bullet?
Table 3: Can blockchain overcome deficits?
Problem area
Blockchain solution
Fraud and manipulation
With blockchain technology, it is important that the data entered
are correct, since it is not possible to change it afterwards (Xiaoqi,
Jiang, Chen, Luo, & & Wen, in press). The waste separation
station does not have the correct (automated) solutions to ensure
that these source data are correct. They are too dependent on
another party, which is not confidential enough to use as source
data. Blockchain technology is not going to solve this problem
and, in fact, a solution has to be found before blockchain can be
implemented.
Wrong or loss of
information
Once something is entered in a blockchain, it is immediately safe.
Since the guidance letters and weighing vouchers are digitally
entered with a blockchain solution, they cannot be physically lost.
A blockchain implementation is the right solution to overcome
this problem.
Manual processes
Blockchain technology itself does not directly offer the solution
for automating data processing. However, it offers multiple
options with the help of other IT solutions.
Lack of knowledge
about technology
Blockchain technology is not going to introduce a change in the
current maturity of knowledge and expertise in IT.
Lack of control
If organizations save the data using Blockchain and organizations
ensure that this is done in the right way, it is possible to use the
Blockchain technology as a "trust factor". The data contained in it
cannot be changed and if it is entered correctly you can guarantee
that the information is reliable (Crosby, Pattanayak, Verma, &
Kalyanaraman, 2016). This offers a solution for inspection
services such as ILT, because everything is digital.
Overseeing the problem areas, one should take into account that almost all of these
problems are not solved by blockchain technology. For instance, Control mechanisms
must be installed to ensure correct data. Or sufficient infrastructure must be in place to
implement a blockchain solution between different parties. In this, the municipality can
have a key role as they can impose the use upon stakeholders. In other words, they can
guide the development, execution, maintenance and adaptation of blockchain
architectures and applications (Ølnes, Ubacht, & Janssen, 2017).
There are several limitations that have to be pointed out. First, since blockchain is a
relatively new technology, there is still a general lack of knowledge on its benefits and
limitations. Therefore, the amount of people with deeper insights into the blockchain
phenomenon is limited and restricted to a small group of innovators. Second, the study
didn’t fully complete the cycle of design science research. Building a demonstrator and
evaluate this with the stakeholder would leverage our knowledge (and theirs) about the
potential benefits or limitations of blockchain technology in this context. Thirdly, the
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31ST BLED ECONFERENCE: DIGITAL TRANSFORMATION: MEETING THE CHALLENGES
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G. Ongena, K. Smit, J. Boksebeld, G. Adams, Y. Roelofs & P. Ravesteijn: Blockchain-based Smart
Contracts in Waste Management: A Silver Bullet?
logistical component of waste management is not fully considered in this research. In the
Netherlands, there are only a few parties concerned with waste transport and these are
often innovative. In this branch, they can, therefore, act as an accelerator for blockchain
technology.
Despite these limitations, this research contributes a valuable discussion about the use of
blockchain technology as its applications are still in its infancy. Further research is needed
in order to grasp a full understanding about situations in which blockchain technology is
beneficial or not. A multiple case study of current blockchain initiatives would support
this understanding.
Acknowledgements
The authors wish to thank the municipality of Utrecht and the project leaders of the Blockchain Lab
at the HU University of Applied Science Utrecht for their valuable contributions.
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... It is these characteristics that have resulted in extant academic literature highlighting the benefits of blockchain technology for resource and waste management. These benefits have been described generally (Chapron 2017;Ongena et al. 2018;Saberi et al. 2018;Steenmans and Taylor 2018;Taylor et al. 2020) as well as in more targeted application contexts, such as circular economy transitions (Kouhizadeh et al. 2019;Vogel et al. 2019;Shojaei et al. 2021). Circular economies have been identified as strategic policy instruments critical to addressing the concomitant crises of constrained natural resources and unsustainable waste management (e.g., with circular economy laws adopted in China, France, Japan, Spain, and South Korea, and proposed in Mexico and Uruguay). ...
... While recent academic literature considers some of blockchain's distinctive attributes and activities relevant to waste and resource management sector development, more systematic and holistic overviews of blockchain's existing and emerging disruptions to those sectors in practice are lacking (Ongena et al. 2018). Little extant literature reports on experiences with blockchain across the waste sector. ...
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... Blockchain only overcomes some challenges that the circular economy faces. Blockchain will need to be combined both with other technological advances, such as the Internet of Things, sensors, and artificial intelligence, as well as with other measures effecting systemic and behavioral changes [19], [22], [32]. ...
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The literature on blockchain technology and circular economy is at a nascent stage, with only initial limited and superficial recognition of the possible role blockchain may have in supporting circular economy laws and policies. This paper contributes to this emerging area by exploring the regulatory opportunities and challenges for adoption of blockchain for circular waste management. In particular, through a mixed methods approach combining empirical and doctrinal research, this paper presents initial findings on: (1) the current role of blockchain within the legal landscape on circular economies; (2) the regulatory barriers of blockchain application to circular economies; and (3) opportunities of blockchain in supporting regulatory mechanisms promoting circularity.
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