When combined, Blockchain and IoT have the potential to reshape the construction industry and drive it towards effectiveness, accountability and transparency.
BACpress : IoT is enabling the digitalization of assets and processes in the construction industry at a fast pace. Construction projects are generally complex and involve a lot of regulations and standards. There are issues with trust and verification that compliant work has been carried out, and there’s also no standard method for communication between parties. As a result, the industry now has increasing amounts of fragmented repositories of data in addition to a growing list of intermediaries. Companies should leverage the combination of blockchain and IoT to increase transparency in cost, time and scope of projects.
In simple terms, a blockchain is a database architecture technology implemented as a decentralized, distributed and public digital ledger that’s used to record transactions across many decentralized computers. A record cannot be altered retroactively without the alteration of all subsequent blocks and the consensus of the network. This allows the participants to verify and audit transactions inexpensively and create trust and transparency, and it eliminates paper and duplicate effort.
There are different approaches to implement blockchain technologies. While they might have the same general functions, different blockchain platforms have different security and technology risks, and organizations need to evaluate the various solutions across their lifecycle to make sure it fits their particular needs and risk appetite.
Public blockchain: access is wide-open; anyone can become a node and participate in the blockchain.
Hybrid blockchain: a form of hybrid system that provides for situations where whitelisted access is required but all the transactions should be publicly viewable. Examples of this are government applications where only certain people should be able to write to the network but all transactions can be publicly verified.
Private blockchain: access is limited to specific users through a permissions-based private network. Anyone outside of the private blockchain cannot see or participate in blockchain transactions.
An Overview of Blockchain in Construction
The construction process involves a lot of professionals who need to exchange information to design, implement and operate projects successfully. There are a lot of intermediaries who are used to authenticate the whole process like regulators, bankers, insurers, lawyers, etc. There’s a need for building trust amongst all the stakeholders. The transition of operations from traditional methods to digital forms paves the way for a digital tool like blockchain that can foster and enable trust amongst players.
For those who want open, trustworthy IoT communications without having to rely on intermediaries, a private blockchain could provide the solution and enable data security between IoT devices. The power of blockchain is that it creates very powerful standards in a simple-to-adopt way that doesn’t interfere with existing processes.
Blockchain is a peer-to-peer implementation where trust is managed systematically to provide a level of transparency that enhances productivity and simplicity. For contractors who deal with many different subcontractors, owners and suppliers, all of whom use disparate systems, blockchain allows contractors to streamline and manage all the data in one immutable ledger. The idea that players need to come together and solve problems through everyone logging into the same database is a welcome development, especially considering that the construction industry boasts of some of the highest litigation costs of any industry.
Implementing blockchain ensures that all data, regardless of the system or source, become verified and trusted. The leading objective of blockchain is to break down data silos to leverage information in real-time. Blockchain is a shot in the arm for the industry because it isn’t one central authority but a shared and open platform to secure members who then drive trust, transparency and integrity.
Blockchain is opening new IoT capabilities as it allows a seamless exchange of value and digital assets amongst players without requiring an intermediary to do so. Value might be a service, a product or approval in the form of a Smart Contract. The combination of blockchain and IoT seeks to improve outcomes in the construction industry. Blockchain creates a trustworthy chain of events, transactions, assets and critical project details. This allows emails, project management systems and accounting systems to come together in one place, creating a verified record of all transactions on the blockchain and ensuring that data cannot be lost. It means there’s one shared version of the truth for every project, and that’s what the industry needs to eliminate duplication, reduce errors and ensure data integrity.
Imagine the challenge faced when closing out a large construction project; it’s a nightmare to collect data from all the subcontractors and input it into a report. Typically, project data is scattered, difficult to source and hard to verify. This is compounded by the lack of project collaboration and the silos that develop from the use of different technological solutions. The major problem with a siloed approach is that it produces data that’s often inaccurate or wrong. Data retained in isolated systems is usually fragmented and rarely shared between organizations, so it loses its value and verifiability.
Without blockchain technology, a receiving organization must independently invest in establishing the trust of any data it receives before using it to make business decisions. Blockchain, however, allows partners to share real-time data, the history of that data and any modifications to it. The blockchain aims to improve on data integrity by collecting data directly from the source through IoT devices and other digital systems and being able to come to a consensus on which version of it is the truth. Having access to trustworthy data creates exciting downstream possibilities for businesses.
Blockchain will not replace software applications; it will just allow them to work closer together. It can be the standard that organizes in the background to facilitate the operational process. Trusting the data source is also a concern, and, after all the work is done, the data just end up gathering dust somewhere. With blockchain, handover can be done actively and in real-time. This makes the blockchain the place where you can create truly living operations and maintenance manuals.
Possible Use Cases of Blockchain in Construction
Decentralized Network Management
For blockchain to be successfully applied, it needs to be working with “digitally native” assets, meaning assets that can be successfully represented in a digital format. IoT and other tools enable the digitization of non-digital assets. Given the proliferation of IoT devices in the construction industry, blockchain-type technology can form the backbone of a decentralized network of IoT devices. In these cases, a blockchain would serve as a public ledger for a massive amount of devices, which would no longer need a central hub to mediate communication between them.
Streamline Financing and Payments
On a construction project, a contractor may request an advance payment to help them meet significant start-up or procurement costs that may have to be incurred before construction begins. In these instances, the client should require an advanced payment bond to secure the payment against default by the contractor. Blockchain technology could eliminate the paper trail and significantly reduce the duration of document circulation, from more than a dozen days to less than 24 hours.
Late payments and their relating cash flow issues have been enduring problems in the construction industry. One of the most applicable uses of blockchain in the construction industry is to embed a blockchain-based platform into the project execution practice, which can initiate payments based on digitally approved work, contractual terms and smart contract actions.
Providing proof of compliance (taxes, NECs, professional registrations, etc) is often difficult, time-consuming and costly. Putting proof-related information on the blockchain would significantly lower the costs and administrative burden, as well as generally help increase the accessibility of information during bidding and project implementation. Further, tying blockchain technology to emerging technologies such as AI and IoT can enable real-time data gathering and processing to improve overall compliance. Together with the project information logged on the blockchain, regulatory compliance can be easily demonstrated.
Provenance and Traceability
Sustainability issues make customers demand proof of the legitimacy and authenticity of products. Tracking goods and assets through the supply chain has become an important way to improve operational impact. Knowing the full journey of a product comes with several benefits like improved product safety, a reduction in fraud and increased accuracy in forecasting and collaborative planning within the industry. If a company’s supply chain breaks down or delivers a final product that’s faulty, that impacts the company financially.
Asset provenance is a critical aspect of quality assurance and quality control. It’s achieved through data drawn from IoT devices, different suppliers and their systems using API integrations. Provenance for structural materials and the creation of a verified chain of custody ensures transparency for all parties in the supply chain and improves the construction sector’s score on sustainability. Trustworthy suppliers with high-quality products can be recognized and incentivized to maintain quality certificates, thereby establishing long-term relationships.
A smart contract is essentially a computer code that can self-execute as well as self-enforce the terms and conditions laid out in a legal agreement. For example, if the contractor has reached an agreed stage in building a structure, then he requests for inspection. If the authority responsible for inspecting the work approves, then the contractor gets paid.