Construction companies have to invest in Blockchain technology already?

Doka UK 12 December 2018.-Another new technology to follow with interest for the construction industry is BlockChain. From BIM + (Chartered Institute of Building) they explain the birth and development of this advance: The Blockchain is a new way to store and record transactions. To put it simply, we could define the Blockchain as a peer-to-peer controlled distributed transactional database. A digital ledger where different types of agreements (e.g. contracts, financial transactions) are recorded and confirmed as completed.

Its main difference to traditional databases is that it lacks the need for a central authority. There is no middleman, such as a bank transferring money or a lawyer to confirm the conditions of a contract. In that sense, there is no single database or company on which it hinges. Every node in the Blockchain is containing some type of information, which in a nutshell could be categorised to the following:

  • Evidence of a bank’s fiscal transaction;
  • Contract;
  • Ownership certificate;
  • Authenticity statement.

What makes the Blockchain unique, in terms of data safety, is that every piece of information in this database is “chained” to the rest through a digital signature. This allows for a faster and more secure way of data exchange. In other words, it encourages the exclusion of intermediary parties in a transaction which takes place between two distinct members of the same peer to peer network.

In fact, in most of the forums, seminars or technical sessions Blockchain is presented with these statements:

  • Introduction to the blockchain.
  • An overview of areas of applicability Benefits and Blockers.
  • Is the blockchain fit for construction and is construction fit for new technology Solving Business Problems.
  • What are the real problems that the blockchain can solve.
  • What are vanity ‘me too’ projects Quality and evidence is.
  • If trust is the issue does the Blockchain solve it.
  • What does the blockchain mean for quality.
  • Why is this needed in construction.
  • How could it change the industry conclusion.
  • You can’t solve business problems with technology.
  • You can improve business with technology.
  • Construction needs innovation but needs to tread carefully

2018-2019: The best time to invest in Blockchain?

Digital Construction Week analysed and discussed the incorporation of Blockchain technology in construction, as in other economic sectors:

Digital Construction Week were originally skeptical about Blockchain, not because of the lack of potential of the technology but because they saw the challenges in the industry as much more fundamental.  Fast forward 30 months, since those original speculations and blockchain is being mentioned as a solution for all ills in every industry and Construction is not exempt.

The issue for Bockchain is the common one for new technologies.  With a shiny new hammer every problem looks like a nail.  Into the hype the Building Research Establishment (BRE), have dropped a refreshing dose of reality in their report published earlier this year: “Blockchain – feasibility and opportunity assessment available here. This is a hype free and measured review of the potential for Blockchain technology. It examines a number of proposed applications and should be required reading as an antidote to the unconstrained hyperbole the industry has been subjected to recently.  While the review is not exhaustive it assesses a number of the issues that impact technology adoption in construction in general and should not be ignored.

At BaseStone, a construction focused technology platform, they see the potential that this technology has for addressing some fundamental issues within the industry. The BRE article examines the potential for Smart Contracts which could provide the validation for payment stages which already form part of the standard contracts. If the industry was able to take this first step, perhaps the sector could set the groundwork for faster payments and smarter contracts which could benefit the whole industry.

However, technical construction magazines (pbctoday) in the UK have previously published their thoughts on the main reticence’s of the sector with Blockchain: “The process of activating automatic payments requires some tweaking, Blockchain is currently only able to execute cryptocurrency payments, which are not widely accepted in construction. Instead, it is thought the system will trigger legally binding documents that detail the payments required. Another potential complication is the transparency of data sharing inherent to Blockchains which, though beneficial in terms of the potential to cut disputes, is at odds with the sensitivities and intellectual property concerns of many construction companies”.

The most optimistic about the advantages of Blockchain

So far we have seen the birth of Blockchain technology in the construction sector. We have highlighted the opinion of companies and experts for and against this technology. On the optimistic side, the experts including (IBM Developer) believe that:

Blockchain can provide secure information exchange which can be permissioned and channeled for multiple participants. This brings the advantages of a shared view of a single truth, dynamically created without reconciliation between ledgers, yet different classes of participants are able to see selected information only. For example, a client may see that a boiler has been purchased by a tier 3 supplier but not how much was paid.

Imagine a construction sector where materials buying is dynamically linking the market with the projects. Concrete, with its limited useful life, can be placed on an open market in a city with price reflecting availability by the second. This reduces waste and encourages transport resource efficiency.

Imagine payments for labour and materials being triggered automatically throughout the supply chain as progress is made with zero financial reconciliation required. Thus a client knows the material originator will receive payment for a specific project, ensuring both fairness and completeness of warranty.

Imagine the regulators, insurers and owners of built assets being able to see what materials are being used, by who, using which methods and when. Not only during construction but during the design phase, checking against the digital model during construction and then at any time in the future.

How about socially important projects being paid for by secured crowd funding from anywhere on the planet, then the investments being able to be traded on an open market without fees? This has the benefit of disintermediation and separation of the funding from the project, both lowering costs and reducing the negative influences that investors have on the construction process.

The use cases are numerous and many are yet to be discovered. What is clear is that we are on the cusp of a revolution driven by blockchain technology. In much the same way that the Windows operating system revolutionised computers, a global construction data system could become the construction operating system.

In engineering and construction there are many situations where careful control of activities is vital to safe and efficient completion. On many occasions decisions have to be made that carry great responsibility. A good example of this is “safe systems of work” used in construction, engineering and facilities maintenance. Teams have to carry out work in which one wrong action or fault can lead to death, severe injury or property damage. The planning and authorising of these activities is a complex time-consuming decision-making process.