What should happen to biodegradable clothing at the end of its life?

I am currently developing a textile concept around this exact topic, and I'm deliberately trying not to start with the product and then justify the solution. I'd rather start with what is the best end-of-life pathway, and then design the products backwards from there.

So for context: it happened many times that my 100% cotton t-shirts, underwear, shirts, socks, get so damaged that repairing them would make no sense and giving them away would just be stupid because no one would see value in using them again. I have for example a t-shirt full of holes where the fibers got torn.
But today I am not aware of other solutions than the bin, with the final destination being the landfill or being burnt.

So if we consider a product that is really made with 100% biodegradable materials (no coating, no toxic substances in the process), what would actually be the best thing to do with it when it's completely worn out?

I'm currently considering a few different pathways:

1. Worm composting: can old clothes be good food for the worms?
2. Aerobic composting / industrial composting: could it simply return to biomass through conventional or industrial composting?
3. Anaerobic digestion: could the fibres be used as an input for biogas production? On this I explored a bit and I could not find a facility that accepts textile input, only food leftovers it seems
4. Fibre recycling: could we recover the fibres and turn them into another textile or material instead? I am not very knowledgeable on textile recycling so not sure whether a mix of natural fibers can be recycled? for example cotton + wool or cotton + another cellulosic fibre. I know mixed fibres are a major challenge, but I'm wondering how much of that applies when both fibres are natural rather than synthetic.

Which option should actually come first?
My instinct is that keeping the material in a material cycle for as long as possible should generally be preferable (= recycling). Ultimately, though, I'd like to understand whether recycling, composting or anaerobic digestion actually makes the most sense depending on the material and infrastructure available.

Thank you for your input! :)