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How Blockchain and IoT Are Opening New Capabilities in the Construction Industry

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.

Blockchain Basics

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.

Compliance Simplification

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. 

Smart Contracts

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.

  • If contractual terms and conditions are precisely registered on a smart contract, the execution and monitoring of conditions are highly accurate. 
  • Every payment, transaction, business interaction and execution can be registered on the blockchain, making the whole process transparent and traceable. 
  • The network of smart contracts can ensure transparency and reduced complexity for the whole construction procurement. In this way, the risk of late payment and the number of disputes can be reduced.
  • Significant cost savings can be reached on overheads, administration and project control. Moreover, project procurement information is logged in a traceable way unlocking project evaluation and cost optimization insights.
  • A contractual collaboration that’s supported and automated with smart contracts can decrease significantly the number of claims and disputes, thereby improving stakeholder relationships.

IoT sensors can serve as a closed data source for smart contracts, eliminating potential human errors e.g. an access control system used to log in workers onsite, measuring weather conditions, GPS of structural elements, RFID of delivered supplies, etc. 

BIM and Onsite Asset Tracking

Construction brings together large teams to design and shape the built environment. With technology and, in particular, IoT and Building Information Modeling (BIM) becoming more widespread, openness to collaboration and new ideas is increasing across the industry. This momentum could be leveraged to bring the use of Blockchain technology to the fore. BIM is a computer model that holds a wide array of information about the asset such as the 3D geometry, construction management information like time schedules and costs or operation and maintenance metrics. BIM and blockchain technology can be combined to serve as a single source of truth. 

BIM technology works as a single source of truth for data while putting the audit trail of design approvals, data verification and project management decisions on a blockchain would result in a combined source of truth that covers all aspects of the project. 

BIM can combine information from the blockchain, such as supply chain information, the provenance of materials, payment details, etc. particularly during construction. It can also assign information to the blockchain, like design decisions, source of data or model modification orders. This information can later be used by smart contracts to initiate further action, such as payments or material orders.

Blockchain, IoT and BIM provide a foundation that leads to Digital Twin and Smart Asset Management as projects don’t stop at the delivery of the asset but transform and continue until the end of the lifecycle of the structure.

3D Printing of Novel Building Parts

3D printing and “additive manufacturing” (aka building 3D objects by adding layer-upon-layer of material) are highly technology-driven processes, whereby the digital files involved can be easily transmitted with the click of a mouse. Consequently, parts and products are easier to share and track — leading to smarter digital supply networks and supply chains.

Using blockchain to support these evolving infrastructures can eliminate security vulnerabilities, protect intellectual property from theft and streamline project management, ultimately helping the 3D printing and additive manufacturing sectors to grow and scale.

Security

Privacy and security are two major challenges within IoT. Incidents such as the distributed denial of service (DDoS) attack by a botnet made up of IoT devices, and the seemingly continuous news stories about security breaches compromising user data have led many developers to search for solutions. One potential solution to IoT privacy and security challenges is the use of blockchain technology. As construction sites become equipped with connected sensors, the risks to plants and personnel are great. Companies like Xage, Guardtime and Filament are employing blockchain techniques to offer security solutions. 

Briq, Probuild, ULedger, Hunter Roberts OEG&Gartner Builders, Lifechain by CostainTata Steel and BIMCHAIN are some of the companies which are working to implement blockchain and IoT to improve outcomes in the construction sector. Partnership organizations that have started to discover blockchain opportunities specifically for the built environment include the Construction Blockchain Consortium

Conclusion

Construction is a highly regulated industry that employs a wide variety of players for often complex projects. Validating their identities, their quality of work, and their dependability can be difficult and time-consuming. A blockchain-based ecosystem could help solve this challenge by making it simpler for general contractors to verify identities and track progress across multiple teams. Blockchain technology could also help ensure construction materials are sourced from the right places and are of the appropriate quality, while smart contracts may make it simpler to automatically issue timely payments linked to project milestones.

The full value of blockchain may be realized through the collaboration of different parties within the construction industry. It’s, therefore, advantageous to share best practices and implementation experiences through partnerships and common pilot projects.

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