Construction: a Blockchain Use Case

Blockchain has proven to be such a transformative technology, successfully affecting businesses from a wide range of sectors. By bringing in a trusted infrastructure, it’s becoming the backbone of the fourth industrial revolution. 

We’re past the stage where ‘blockchain’ was a buzzword and projects were sprouting and multiplying at a great speed. Many were also failing – hence the ICO bubble crash. That’s when the tone changed, and the real focus came to light: blockchain is a solution to an issue that already exists. Applying it to a created problem won’t generate an impact. The real disruption lies in targeting industry problems that are already there. 

Blockchain’s potential lies in creating a trusted decentralized environment, where its applications can provide efficiency and transparency to businesses. 

We’ve covered a broad range of blockchain’s applications use cases, from aviation to pharmaceutical. One of the industries that holds great potential is construction. Initiatives are still few, as the sector is proving difficult to penetrate given its complexity. 

Comprised of a wide range of players, data-heavy management and logistics, and extensive regulatory obligations, construction is a challenging industry for blockchain adoption. On the one hand, it’s seen as conservative, usually dominated by large companies or families, and on the other, it’s seen as ‘ripe for disruption’. 

The question is: can blockchain find a place amidst large teams of contractors and subcontractors, an abundance of building codes, safety regulations and standards? 

Let’s check it out! 

In a conservative sector like construction, can blockchain be useful? 

The opportunities brought by a distributed ledger technology can be seen as a way to bridge cultural and practical barriers that have historically impeded change in the sector.

The main applications of blockchain in the construction industry entail the optimization of project management, delivering a trusted database, the automation of processes and paperwork as well as acting as a ledger for regulatory concerns. 

• A reputation ledger for subcontractors 

The procurement process for building usually starts with a client, its consultants and the main contractor. The main contractor can engage subcontractors to carry out specialised work, which can vary from carpenter to electrician to masonry. Several intermediaries sit in between the client and the end product. 

Tracking subcontractors and their tasks can be a challenge. Imagine the renovation of an office building where at least 15 subcontractors are working across floor floors. Equipment needs to be taken care of, access to the building should be managed strictly, and deadlines are quickly coming. This is where blockchain can come in. 

A ‘reputation ledger’ can serve as a way to track subcontractors’ deliverables and serve as a benchmark for the recruitment process. This will make it easier not only to keep track of the construction process but also to identify reliable subcontractors for a project. Also, it can represent a shift to a more direct contractual relationship. 

• Smart contracts to trigger milestones 

Smart contract is blockchain’s most well-known applications, and it’s being leveraged across different industries. Construction isn’t much different. By putting smart contracts in place, contractual processes and paperwork can be automated, saving money, freeing up valuable resources and speeding up project delivery. 

Smart contracts can be set up in the different levels of the construction ecosystem, from administering the building to the payments process. Because it is only triggered when a task  – set beforehand – is completed, it enables clients, contractors and managers to track the building process and identify accountabilities. The case highlighted above is a great example. It can also be used as a milestone-based payment system, which will automate agreements, creating an auditable record of transactions. 

Also, it can be a ledger for certifications of events in the life cycle of the building. 

• Life-cycle ledger 

The blockchain technology can be particularly useful in this case, with applications that go beyond smart contracts. It can serve as a ledger to keep an end-to-end chronicle of the construction process, recording on the blockchain information that can be referred back to when needed. This can be particularly useful in cases of building maintenance, renovation work and regulatory compliance. 

In the same spirit, the ledger can store warranties and certifications. Due to its nature, it can protect the construction process from tampering and fraud, since material, tests and results can be stored and tracked on the blockchain. This will enable easy comparison to building codes and standard, streamlining inspections during and after the construction phase. In the post-construction period, it can also be used to keep a record of events in the life-cycle of the building. 

The ledger can be a powerful tool to improve processes and optimize organizational capacity to locate and share (sometimes large quantities) data with the required individuals and entities. 

• The management of data is a crucial tool for project management 

Here, blockchain as a service can be of particular importance.There are cases where the technology provides a communication platform between different players, allowing them to manage the workflow in a new, efficient manner. It can enable the tracking of information, cut down the delays in sending and documents, and boosting decision-making procedures. 

“Construction is rife with data and intermediaries, often including participants that don’t necessarily trust each other. There is no standard method for communication between parties. The power of blockchain is that it creates very powerful standards, in a simple-to-adopt way that doesn’t interfere with current processes.” – Bassem Hamdy, CEO, Brickschain Construction Blockchain Inc, on Aon Risk Solutions. 

A “shared project management dashboard” can revolutionize an industry comprised of numerous players and strict regulatory procedures. 

We’ve seen that the potential to disrupt is there. Now, is it really taking place? Let’s have a look at real-world use cases! 

What are the real-world use cases? 

A blockchain-enabled project management system 

HerenBouw, an Amsterdam-based building company, is making building development life-cycle more efficient through a project management system based on the blockchain. Operating in the commercial real-estate area, they are using the technology in a large-scale development project in the city’s harbor. The focus of the blockchain’s application is to register transactions at legally-binding moments, providing accuracy and an audit trail. 

According to Marc Minnee, Propulsion Consulting’s founder, “Blockchain provides a platform for clearly cascading work products down the chain and holding everyone accountable for completing key tasks.”

He further explained that the benefits of this tool include: timely information, unambiguous communication and fewer mistakes. Consequently, stakeholders are incentivized to register facts on-chain to receive what was ordered and to be paid. 

Avoid losing data on hand-of and secure a construction project’s documentation on blockchain

In California, a blockchain firm called Briq is working to capture and secure a construction project’s documentation on a ledger. Parties involved will be able to navigate the system and present as a ‘deliverable. 

On behalf of Gardner Builders, Briq developed a ‘digital twin’ for a construction site, where every room has an inventory displayed. This is said to be a “first twofer in the industry.” The finished project was handed in along with the digital twin, holding the project’s documentation. The ledger exists on multiple databases, which are all kept in sync. It provides a secure and unchangeable copy, and any attempt to modify the record will violate the protocol. 

In an industry where 95% of all data can be lost on handover, this solution is extremely valuable. Briq’s CEO, Bassem Hamdy, explained: “When a product or specification needs to be found in a building, there is finally a place to go to search for what is actually in that building.”

Briq proposes several solutions to the construction industry tailored to reduce risk and increase profits. They leverage AI, machine learning and blockchain. 

Final word

The sheer work put into project management, data input and tracking, and billing procedures has proven to be too old-school for this modern age. Even though the industry is conservative and intricate, it’s time to change habits. The adoption of blockchain and other fourth-revolution-technologies may prove to be a challenge, yet there’s proof that the benefits attached are massive. 

Technological applications can be the road for significant advancements in the construction industry, bridging cultural gaps and providing a smooth communication and management platform between players.