The Blockchain is Bound to Transform the Construction Industry
Blockchain technology has already proven to be a powerful tool to develop useful applications for almost any industry. It is a highly versatile technology that allows a new problem-solving approach, pushing forward the disruption and transformation of many of the traditional business management and organizational models used throughout history.
From the slums of the Dark Net and underground markets, the blockchain is now emerging as the new technological “Holy Grail” that will become crucial for the development and enhancement of systems like the Internet of Things (IoT) or Artificial Intelligence.
The distributed ledger technology enables the design of tools which can help streamline processes in project development and the management system attached to it. Also, by eliminating the need for intermediaries or third parties, it can lead to a reduction in expenses and greater empowerment levels to any business.
Right now there are a lot of industries researching the blockchain, and developing many applications as well, that will bring this new technology to mainstream use. One of the sectors considered to be in need of embracing change is construction, and according to Dave Hughes a Construction Consultant, the blockchain could be the right answer. He argues the industry has been historically affected by cultural and practical barriers, saying that rigid regulation has also been one of the major issues holding the industry back from change.
Nevertheless, regulation is necessary for several obvious reasons. We are talking about people’s houses, their homes; if it’s built to meet the security standards, or using the adequate materials to make it energy efficient, and of course all of those mandatory requirements. So it makes sense we should have regulation to protect the end consumer. What Hughes proposes is that the blockchain and the Building Information Technology (BIM) can be used to streamline compliance and solve issues with trust and verification in the whole process.
“A simplified project procurement process for a building currently looks like this:
1) Client employs consultants to create tender documents
2) Tenders are called and a main contractor engaged
3) The main contractor then engages multiple sub-contractors to carry out specialist works on site
4) A building contract is entered into, administered and monitored by consultants
5) To handover a building requires that various sign offs, certifications and warranties are checked and confirmed are in order.”
The big picture here is that the main potential uses that a distributed ledger offers are extremely relevant and can be decisive for the future of the construction industry. Hughes suggests four uses of the Blockchain; recording value exchange, administering Smart Contracts, combining Smart Contracts to form a Decentralized Autonomous Organisation (DAO), and certifying proof of existence for certain data.
For instance, a building’s DAO that would be able to manage all the aspects of the construction. Payment would be made from a DOA’s wallet, connected to wallets of the building’s residents. That wallet could also be in charge of paying for the building’s expenses. Even rents could be collected, corporate body fees, and insurance payments all managed autonomously.
The construction phase would be no different. It would probably just take more elaborated human intervention to clarify requirements and run the right decisions to meet those requirements.
For instance, Hughes explains, “light fitting, paint colour, temperature range in rooms and so on, would be requirements and decisions start a series of ‘if / then’ inputs that will use bundles of interrelated Smart Contracts executed between client and different members of the project team, main contractor, sub-contractor to design, monitor, approve, tender, install, certify and take handover of the built asset.”
“Project governance can also be captured on the Blockchain. Records of approvals in pre-construction phase but also during the in-use management of the building for voting on various issues requiring approvals.”
Of course that this would all have to be made over a structured network of digital IDs to identify the different contracts, but we can already get the whole picture as to how impactful this organization model would be.
By using the blockchain along with other rapidly-advancing technology, the construction industry could benefit from reduced costs by removing intermediaries, as well as greater control of costs through the transparency of the time and scope of projects. For now, this remains just a concept. There are still a lot of challenges ahead, but this approach seems to be the first step leading the construction industry to turn its focus toward distributed ledger technology.