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The construction sector is one of the largest in the world economy with around $10 trillion spent
on goods and services every year. However, it is one of the most highly fragmented and unproductive
sectors. Construction productivity has been flat for decades, while that of manufacturing
has nearly doubled over the same period and continues to improve. The industry needs
to improve its efficiency, productivity and embrace new, emerging technologies.
Digitization is part of this improvement. The first digitization revolution saw us switch
from hand drawings on paper to computer modeling software. Projects were constructed faster,
communication improved, and trades became more specialized. Drones, smart sensors,
tracking software and the Internet of things are changing the landscape of the industry.
For example, the use of BIM or Building Information Modeling made the design process
more integrated. Virtual Reality and Augmented Reality are being used in pitch meetings to
explain projects to clients. Sensors monitor site conditions and workplace safety.
We are now seeing the emergence of a second digitization revolution that could be centered
around the new blockchain technology. In this video, we’re going to understand how
it works. We’re also going to look at potential applications of blockchain in the architecture,
engineering and construction world and all the problems with it.
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. Currently, we trust third-parties like notaries, banks and
lawyers to act as an intermediary. However, they add considerable time and money to transactions.
Blockchain allows us to cut out intermediaries, keep data secure and speed up decision making. It
generates trust without the need for a third party because no single person or group has control,
all users collectively retain control. 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.
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Another advantage of blockchain is identifying 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. Blockchain applications can be linked to
bank accounts or cryptocurrency accounts to send faster payments. Builderchain and Builder Pay
is a blockchain-based construction marketplace that uses commitment tokens to distribute
funds from the construction loan to the project owner, subcontractors and manufacturers.
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. Maersk and IBM
launched a blockchain-based system in 2017 called the TradeLens Platform. It is an interconnected
ecosystem of supply chain partners - cargo owners, ocean and inland carriers, freight forwarders,
customs authorities, and more. It offers a holistic view of shipment data and documents.
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. A French company called BIMCHAIN has developed a blockchain application
to validate the origin, ownership and integrity of the data in the process of transferring the BIM
models. “The BIMChain solution allows you to notarize and verify any type of
data and BIM file in the Blockchain” Let’s be realistic, there’s a long road
ahead before blockchain becomes the norm in construction. Many companies are still hesitant
to adopt 3D modeling software, they still plan all their projects in 2D. Accepting blockchain
requires a huge cultural and organizational shift and the development of new business models.
Building codes and regulations will be one of the last to adapt to blockchain documents.
We will be juggling 3 mediums for a while: a paper trail, email trail and a blockchain
trail. Designers and engineers are already stretched to their limits under tight schedules.
Blockchain applications have to work independently and seamlessly without manual monitoring.
The cost of the system is another concern. The construction industry already runs
on narrow profit margins. It is unrealistic to expect small and medium sized companies
to shell out money on new technology and hire the necessary people right now.
Another problem is that BIM models are not the source of truth. I haven’t worked on a single
project that is completely flawless. It seems like blockchain technologies are being developed
under the assumption that engineers and designers get it right and that people out on job sites do
it wrong, which is very unfair. Contractors and subcontractors make drawings work.
I believe that blockchain will be a part of construction in the near future,
but it cannot operate on the same principles as the shipping industry or automobile industry. We
don’t have that level of precision and everything isn’t automated. Any manual intervention
brings in a certain margin of error which adds up. There are also many aspects to construction
that simply cannot be automated; responding to RFIs or requests for Information.
Blockchain will definitely help large, complex projects, but small to medium sized companies that
are still modeling in 2D may not see the benefit right now. The construction industry is usually
late to adopt new technologies, so seeing people discuss the idea of blockchain is very exciting.
Let me know what you think about this technology in the comments below. How do you think it can
benefit us and what drawbacks do you anticipate? I’ll link my Patreon page in the description. If
you can support me, I’d really appreciate it. A big thank you to everyone already supporting me.
Don’t forget to hit the like button and subscribe to my channel. Thanks for watching. See ya.