For those of us who need a little education about blockchain, suffice it to say that AEC blockchain is not simply a cryptocurrency, and blockchain is not going away.

Sometimes referred to as the Internet of Value, blockchain differs from cryptocurrency (i.e. bitcoin) in that its primary functionality is to use encryption to validate all forms of data.

Data distribution in AEC is a relatively new concept, which brings with it issues that can be addressed using blockchain. The technology is not in a turnkey usable form yet, but it is expected to be in the next few years. At its core, two things make blockchain effective.

First, its distributed ledger technology is similar to a checkbook. The sender and receiver each have their ledger, and the blockchain is the third, which is not controlled by any one person. Transactions between parties are always shown. The values or data that are transacted are always verifiable. There are no banks involved, and no one to call out in the transaction. Therefore, it does not need to rely upon trust between the parties involved in a transaction. No one has to rely on “goodwill” to depend on a transaction occurring as someone says it has – think back to the old adage, “The check’s in the mail.” With its open ledger system, a transaction can be followed back on the blockchain, and it is immutable. When a transaction is recorded to the blockchain, it is virtually impossible to change.

Second, beyond tracking financial transactions, the distributed ledger of blockchain can be used for real-time tracking of assets, understanding where production is, tracking production or days of construction, and other transactions. Shipment of materials to the jobsite can be tracked, and Internet of Things (IoT) sensors can keep a running total of building components. The entire process can begin as part of the building information model (BIM), and a schedule can even be kept of when components will become obsolete.

Blockchain can help manage ownership of data by issuing keys to access that data, whether it’s the architect, structural engineer, civil engineer, or MEP engineer. It also serves to increase responsibility.

The blockchain uses a “Smart Contract.” This is typically a hybrid code consisting of a combination of human language and computer code that initiates a transaction on the distributed ledger. In effect, Smart Contracts speed up the construction process, because as soon as the contract is satisfied, the appropriate payment is generated. This can improve the lives of contractors and subcontractors, especially if they are living from paycheck to paycheck.

In construction cash flow is everything, beginning with the owner’s payments to the general contractor, from there to subs, and then to their subs. Penalties can be added into the Smart Contract for production delays, as well as bonuses for early completion. By using blockchain, there is no lag due to administrative paperwork or time wasted waiting for payments.  

The use of blockchain requires buy-in and commitment from everyone on the project. Since owners are currently in control of their projects, financing and data, they will need to be the main drivers of Smart Contracts and the impetus for using them. Of course, as with many workflow shifts, the red tape and legalities will need to be figured out. Combined with BIM, blockchain is a powerful tool for construction in the future. Tune in to The AEC Disruptors podcast, to hear how Lou Verenini explains using blockchain in the real-world setting of construction.

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