Articles

Plastic bank

December 24, 2019


“So can you tell us a little bit
about Plastic Bank and walk us through how plastic Bank applied the five rules?”
–>okay so I think this is my all-time favorite blockchain network which is kind of embarrassing because I’ve never worked on it. I’ve been watching it from
the outside. They started out life in the IBM Garage in Montpellier – I’m kind
of guessing about three years ago. I’ve been following it ever since.
So then let me walk you through the problem that this network is
trying to fix. So the founding fathers – there are two founding fathers David
and Sean. David Katz was out scuba-diving – I believe – a few years ago.
He was just alarmed at the amount of plastic he could see in the water around
him. He said “look you know, I’m gonna do something about this.” If you kind
of research, then, where does all this plastic come from? You might be surprised to know that the majority of that plastic comes down a relatively limited
number of rivers. I think it’s about seven or eight. Tends to be in developing and
emerging markets – gets collected on beaches and then and then flows into the
sea. So what David and Sean set out to do, working with the
Garage in Montpellier and an IBM business partner called
Cognition Foundry was – well okay “how can we design a business model to
change the behavior of the folks who are living near to the beaches and near to
these rivers, to turn them into recycling entrepreneurs?” David is
really keen on a “for-profit” motive here. The Plastic Bank is a for-profit
company. It’s actually quite centralized. He’s looking to basically monetize
waste plastic and turn it into currency. That’s the model. So the idea is that you
have various collection points on beaches or near rivers. I think the
Plastic Bank is now in about four or five locations around the world.
The idea is that these collection centers are going to recruit recycling
entrepreneurs – who will take the collection bags and collect plastic and
bring it back to the center. Now how are you going to pay these folks? You
can pay them in cash but the problem here is -m actually there’s two problems
here. First of all they could get robbed because they’re living in reasonably
dangerous locations. Secondly what we’re looking to do here is we’re
looking to sell this plastic to leading consumer packaged goods and leading
retailers to then enhance their brand to then sell the social plastic. So for
example here in the UK you can go to Marks & Sparks – you can get a shopping bag, a plastic shopping bag, which is made out of these recycled plastic pellets from
these from these plastic bottles. Or you can go to Germany, you can buy
a bottle of shampoo produced by Henkel which again is social plastic. So you
know Marks & Spencer, Henkel – the other folks in the ecosystem, they are
willing to pay more for social plastic. Well they need to know two things. They
need to know -“can you prove to me the provenance of this plastic? So it’s come
from that beach or that beach. But also and this is more subtle – “where has
this extra money gone?” Because if you look at the way that these types of
ambitions have worked in the past- very often the money has ended up in the
wrong hands. So how do we make sure that the money ends up in the right hands?–>So like fairtrade coffee – making sure that the the farmers get the bulk of it?
–>exactly, exactly, that’s exactly right. Sometimes these middlemen are not so
nice, right? So there’s one interesting component here, which is that
you can go to these these emerging markets. The crazy thing is you’ll
find that it’s not at all uncommon for folks there to have a smart phone. so crazy -even though they may not have a firm address – they may not have a firm
government identity (in terms of a social security number) but they have a phone.
The brilliance of the Plastic Bank model is is using that fact to drive an
entire ecosystem. So the idea is you take your plastic back to the collection point and you get paid in tokens which go onto your phone. Now
these tokens can be redeemed with local service providers. So the Plastic Bank
has become basically the largest shop in the world for the poor. You can use
these tokens, for example, to pay for school fees; to pay for eating oil; to pay
for light. So you can like hire a solar light for the evening. You could pay for
minutes on your smart phone. So there’s a whole bundle
of services that you can pay for. So we are getting this virtuous circle of
behaviors that are driven by this utility model. Whereby we have the
behaviours of the retailer, the behaviors of the CPG, the behaviour of the service
providers, the behaviour of the recycling entrepreneurs and the behavior of the
Plastic Bank itself all pointing in the same direction. All driven by this
utility token. So this is I think, possibly, the most innovative and
exciting model that that I’ve seen. But it doesn’t stop here. The
beautiful thing about this is you can really turn the collectors into
entrepreneurs in terms of building out their recycling
business but more interesting, much more interesting, is that the behavior of the
individual recycling person (by their phone)- it can be monitored by the app. So you can start to get a trend of business e.g. every Monday we get a bag this big,
every Tuesday a bag that big, every second week … here’s a trend for one, two
three, four, five weeks. You can lend against that So you are starting to drive microfinance. So the Plastic Bank
actually is a means of establishing identity for the unbanked, a means of
cleaning of the environment and the means of driving innovative new finance
into developing markets. The beautiful thing is it’s a for-profit
model. So the Plastic Bank is driven by profit and the local folks who live on
the beaches or the rivers have the opportunity to build new businesses.
To build new businesses either as recycling entrepreneurs or use it as an entry point
into building other other tangential businesses. Of course the token can
grow. Now if we look at the the rules of the model, here, you know the five rules.
We’ve actually got quite a centralized model, here you know. My question in
my mind is how decentralized does this model need to become? My thinking is
as more retailers and more CPGs join and as is rolled out across more markets
inevitably, there could well start to be friction between each of these players.
So you may need to have a more decentralized governance model. Now the
token could be used to drive helpful behaviors here. Now because this is a new market model, in terms of
network effects, there’s no lift and shift here. Every pair, every pair of
trading is is a new pair of peer-to-peer trading – they own the market.
They have no competition. So it’ll be interesting to
see how this thing grows. I think they have operations in,
I stand corrected, I think it’s probably four or five locations now. They’ve
recruited a fair number of big CPGs and big retailers. So maybe they are at that point where that decentralization is starting to rub. Don’t know but it’s quite
centralized driven by a token- owns the network effect – because it’s
a new market model. In terms of the
incentive model is driven by that token. “Have they found the magic formula?” I’m impressed, I think so. Where does it go well we’re creating a marketplace. This could
grow and grow and grow and where does it go. I don’t know but it’s, I think, net net
my favorite blockchain network of all.

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