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Blockchain in Construction

Blockchain technology has the potential to significantly change and improve the construction industry. It allows for more efficient project management by creating a secure and decentralized digital ledger that streamlines communication, documentation, payments and oversight across all project stakeholders. Specific benefits include predictive maintenance of assets, smart contracts that hold parties accountable, proactive third party involvement, accelerated payment processing, instant collaboration between teams, and improved supply chain management. While high costs and industry skepticism currently limit widespread adoption, blockchain is expected to transform construction projects as implementation solutions become more affordable and successful projects demonstrate its value.

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26 views

Blockchain in Construction

Blockchain technology has the potential to significantly change and improve the construction industry. It allows for more efficient project management by creating a secure and decentralized digital ledger that streamlines communication, documentation, payments and oversight across all project stakeholders. Specific benefits include predictive maintenance of assets, smart contracts that hold parties accountable, proactive third party involvement, accelerated payment processing, instant collaboration between teams, and improved supply chain management. While high costs and industry skepticism currently limit widespread adoption, blockchain is expected to transform construction projects as implementation solutions become more affordable and successful projects demonstrate its value.

Uploaded by

anayochukwu
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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TECHNOLOGY

Blockchain In
Construction: How It Will
Change the Industry
By: BigRentz on February 26, 2021

Blockchain technology is a revolutionary tool used to record transactions and link


them together to form a “chain” that’s known as a distributed ledger. Companies are
using blockchain to take control of supply chains and contracts in ways that weren’t
possible just ten years ago—but how realistic is the widespread adoption of
blockchain in construction?

As more construction companies adopt blockchain, even very large construction


projects will become easier to manage. Read on to learn more about blockchain and
the changes it proposes for the construction industry, or jump to our animated
infographic and get the visual scoop.

What Is Blockchain?
Blockchain is a linked series of “blocks” of data that form a distributed ledger, a fancy
name for a collection of accounts—like a checkbook that automatically balances
itself. This ledger is home to transactions or contracts that define a project.
 

It can be thought of like a literal chain, each link a separate transaction in a project. If
one supplier completes a delivery and fulfills their contract, the completed contract is
finalized and added as a new “block,” or link in the chain. This gives blockchains a
natural order that’s easy to follow when looking for information.
The three principles of blockchain define it as secure, decentralized, and scalable to
any size project.
 Secure: Multilayer encryption using mathematical functions hides data in a
coded string of characters that are difficult to crack

 Decentralized: Connections called “nodes” automatically check


transactions, leading to a digital paper trail of verified records

 Scalable: Because the information isn’t stuck on a central server, blockchain


can be scaled to fit very large projects

 
Because blockchain projects are spread out, they take away the typical hierarchy of
information in a project. This improves project transparency, reducing the need for
back-and-forth communication over simple objectives. The result is that any project
can be made more efficient with blockchain technology.

Blockchain Means a More Efficient


Construction Industry
While blockchain has implications for many industries, in the construction industry, it
streamlines project management. It’s not uncommon for construction projects to
encounter snags. Communication between builders, vendors and laborers can delay
completion timelines. Blockchain adoption is a trend that will help the construction
industry become more efficient overall.

There are six immediate benefits to the construction industry that blockchain
technology provides:
 Predictive asset maintenance

 Smart contracts that stay on track

 Proactive third-party oversight

 Accelerated payment processing

 Instantaneous collaboration

 Streamlined supply chains

Below, we break down these six benefits of blockchain in construction.

Predictive Asset Maintenance


Leading construction solutions and services firm Aon estimates that 95% of
information about a construction project is lost in the transition to the completed
project’s first owner. The distributed ledger in blockchain can store lifecycle
information about every asset in a building project, like warranties, certifications and
replacements.
Using Building Information Management (BIM) technology, an immutable, digital
replica of the construction project is set up within the blockchain. This acts as a model
to ensure the project is within scope, but also as a virtual home for assets so they can
be easily searched and quantified. Monitoring an individual asset’s lifecycle and
scheduling maintenance become automated processes, especially if equipped
with artificial intelligence.

Contracts That Stay One Step Ahead


Smart contracts infuse blockchain technology into traditional, written agreements.
Because data is decentralized and readily available throughout the network, the need
for document duplication is eliminated. All contracts live in the blockchain and are
accessible with a simple search.

The sequential nature of a blockchain setup holds contractors accountable by


requiring a project to meet specifications, or else the contract is unfulfilled. Change
orders and delays are immediately traceable to a point of origin, eliminating the need
for time-consuming oversight.
Proactive Third-Party Oversight
When dozens of subcontractors are hired to complete tasks, additional oversight is
needed to ensure a complex project will adhere to local standards and regulations.
This might be legal consultation to comply with government regulations, safety
management to monitor worksite processes or union representation to advocate for
site workers.

For projects that adopt blockchain technology, these third parties can be seamlessly
integrated into project oversight. They have access to crucial documents from the
moment they’re included in the blockchain, reducing time wasted in submitting
information requests.

Accelerated Payment Processing


Processing payments via blockchain is free in most cases. No authorization or
processing fees mean faster payments and less back-and-forth. Blockchain’s strict
boundaries, enforced with smart contracts, ensure payment is received for work that’s
done according to the project framework.
 

Smart contracts work on milestones, so when each milestone is achieved, payments


will automatically proceed. The blockchain framework ensures that work is completed
to specifications, and the hassle of authorizing or collecting payment is nonexistent.
Payment automation reduces overhead and cost overrun, keeping all parties happy.

Instantaneous Collaboration
We’ve established that all eyes have access to the entire blockchain in enabled
projects. While this boosts transparency, it also fosters an environment of open
collaboration where parties make recommendations to improve an aspect of the
project. The specific benefit of blockchain is that it encourages round-the-clock input
from all involved parties—no waiting for meetings or phone calls to discuss ideas.

Smart contracts restrict projects from modifications that might derail them. They don’t
eliminate the opportunity for change, however — they just ensure that changes are
properly vetted and implemented. When all parties including subcontractors have
access to project plans, efficiency-boosting changes are welcome from any source.

Streamlined Supply Chains


Procurement can become especially tedious when dealing with complex projects like
airports or hospitals. Inviting suppliers into a decentralized blockchain network allows
project managers to track materials throughout the entire project, and even ensure the
efficient utilization of those materials. The blockchain would also
incorporate construction equipment to manage rental timelines or depreciation costs.

Digital keys function as unique IDs for one party in a blockchain network. In
construction, assigning keys to vendors would allow their work to be tracked through
the blockchain. This would create a permanent work portfolio that could be used to
appraise vendors for projects.

Blockchain Will Transform Future


Construction Projects
Blockchain’s possible benefits to the construction industry as a whole are exciting.
Australia is home to many of the world’s leading blockchain construction projects,
thanks to a National Blockchain Roadmap implemented in February 2020 that
highlights present blockchain success and opportunities for implementation within
different sectors.
Australia’s National Blockchain Roadmap Steering Committee, responsible for
oversight of the implementation plan, estimates that the global market for blockchain
construction projects will near USD$200 billion by 2025. However, blockchain’s
impending takeover raises some important challenges that will slow implementation.

Blockchain implementation can be costly because it requires investment by all parties


involved in a project. The virtual infrastructure required is beyond what many
construction firms are capable of implementing today, but blockchain implementation
firms like Briq are pioneering the technology in skyscrapers and other large-scale
projects.

Industry skepticism is another challenge to wide-scale implementation. Many


construction contracting partnerships are built from preexisting relationships.
Investing in infrastructure for project planning accounts for less than 1% of
revenues in the construction industry, much less than related costs in similarly high-
tech industries like aerospace.

These challenges are not impossible to overcome. As the blockchain technology


market grows, less expensive ways to access blockchain technology will ease
mainstream adoption. Security, decentralization and scalability can benefit
construction projects of any scale, and the conventional benefits of blockchain will be
too tempting for even the most skeptical critics.

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