How Blockchain is Disrupting the Construction Industry

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We are seeing the emergence of a second digitization revolution that could be centered around the new blockchain technology.

Chapters
0:00 Introduction
0:37 First revolution
1:16 Second revolution
1:34 What is blockchain?
3:13 Smart Contracts
3:50 Sponsor
4:27 Skilled Labor
4:57 Payments
5:36 Supply Chain Management
6:28 BIM
7:13 Drawbacks
9:13 Conclusion

Blockchain is a digital ledger that stores information in records called blocks. Each block has three main components: data like timestamped transactions or agreements, a hash which is a digital fingerprint or unique identifier and the hash of a previous block. These blocks are linked together chronologically, like a chain of blocks. You cannot make a change to the information in a block, instead you create a new block, chained to the last block.

Cryptography makes the blockchain ledger secure. Each transaction is recorded using encrypted data. If someone tries to tamper with data, the change will result in a new hash. By comparing the two root hashes, users can see that the data is compromised.

Another key advantage of the blockchain technology is trust. In order for business transactions to be executed, trust must exist between management and the employees of an organization and between an organization and its partners or customers. Trust isn’t built into the current version of the internet and we don’t trust each other.

The current media attention and hype around blockchain is mainly due to cryptocurrencies like bitcoin. But that is just one way of using blockchain technology. Let’s look at some other practical applications in architecture and construction.

SMART CONTRACTS
Construction projects usually involve a large number of companies. You typically have to wait to get contracts, change orders and addendums from all the parties. You have to pay all the companies involved and wait for their status reports. Blockchain allows us to set up smart, digital contracts with a centralized tracking system. The companies involved define the rules, deadlines, and penalties before the project starts. The blockchain automatically enforces these rules during the project.

SKILLED LABOR
Through blockchain, vendors and suppliers can use unique identifiers to record their performance and grow their reputation. LinkedIn listings and resumes are self-reported and unchecked but the blockchain is the “source of truth”. It can be easier to verify a company’s credentials and check their past roles before hiring them. You can vet candidates and identify recruits more easily.

PAYMENTS
Late payments and cash flow issues are continuing problems in the construction industry. Transactions between parties usually include invoice errors, payment errors, bank holidays, currency conversion fees, etc. The average payment time for small and medium sized companies is over 80 days. This can put the whole supply chain at risk.

SUPPLY CHAIN MANAGEMENT
The fragility of our global supply chain has been exposed over the last two years. Blockchain systems can improve their robustness because materials are logged and traced, delivery time is easier, quicker and less bureaucratic. Dispute resolution is faster. You have better control of inventory and you can order and receive goods as needed which reduces waste. This can lead to lower costs and faster schedules.

BIM & SMART ASSET MANAGEMENT
Building Information Models can act as a single source and dashboard of all information. All the parties would be working to match the physical construction to the BIM model. Any deviation from the model would result in penalties. BIM models can contain supply chain information, source of materials, payment details, revisions, etc. By combining BIM and blockchain in smart contracts, you can make payments, send out material orders, hold subs accountable and improve transparency, communication and workmanship on a project.
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SOURCES
https://www.youtube.com/watch?v=Axj3essEW1Y
https://www.youtube.com/watch?v=am_gEn267Ds
https://www.youtube.com/watch?v=8lY4qaVvR8c
https://www.youtube.com/watch?v=0O2E9bCpKDk
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