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Blockchain in Construction: An Exciting Future Ahead

Akhilesh Srivastava is Chief General Manager (IT & Highway Operations) NHAI, also involved in the modernization of the Highway sector.

6 Incredible Benefits of Implementing Blockchain Technology in the Construction Sector

blockchain-in-construction-an-exciting-future-ahead

Blockchain is the biggest technological disruptor of the last decade. The revolutionary technology behind crypto coins is now being explored for a wide variety of applications across sectors. This raises an intriguing question – can the distributed ledger system that powers digital currencies be applied in a conservative industry like construction? Let's find out.

Construction Industry is Notorious for being the World’s Most Fragmented Sector

blockchain-in-construction-an-exciting-future-ahead

The construction industry plays a crucial role in determining the economic growth of countries. Nations that have a robust construction industry are strong in infrastructure, thereby propelling the state and citizens to economic prosperity.

However, for decades, several woes have plagued the construction industry – reduced efficiency, loss of productivity, safety concerns of the workforce, and more. Generally, the construction industry has fallen back when it comes to embracing and implementing new technologies.

So, is blockchain a good match for an industry that is steeped in traditional practices? Before we dive into the immense potentials of Blockchain technology for the construction sector, here’s a quick overview of the technology.

What is Blockchain?

blockchain-in-construction-an-exciting-future-ahead

In the simplest terms, blockchain is a distributed ledger. Think of it as a database with special features. Instead of storing the data – information, transactions, and agreements – in a single massive server, it is spread across a network of computers.

The information entered in a blockchain is stored chronologically and is monitored by a community of users. What makes it different from a regular database is that it’s entirely decentralised. No single authority is in charge of the data. Instead, the entire community is responsible. Once information is published on the blockchain, it cannot be modified, making it highly secure.

Let me explain that in simpler terms. Instead of having a central book containing all transactions between two or more parties, each party maintains separate records of all transactions. The blockchain technology was introduced in 2009, as the underlying technology to Bitcoin, the world’s first cryptocurrency.

Blockchain is more than technological innovation. It's a business tool that can lead to a paradigm shift across sectors enhancing – accountability, transparency, and effectiveness.

Challenges facing the Construction Industry

blockchain-in-construction-an-exciting-future-ahead

The construction industry has several challenges. Any infrastructure project – be it in the public domain or private sector – is complex and has multiple stakeholders. It's a highly fragmented supply chain that involves numerous entities – contractors, sub-contractors, equipment manufacturers, transportation providers, raw material suppliers, designers, engineers, and several others. This complicated setup leads to several problems: loss of productivity, inefficiency, security concerns, risk allocation, regulatory requirements, project delays, and more.

The added layers of – quality assurance, environmental norms, design review, and contract management – take a toll on sector productivity. It's the need of the hour for the industry to overcome these existing challenges, improve project efficiency and quality while delivering projects on time and within budget.

6 Revolutionary Applications of Blockchain Technology in Construction

1. Quality Control

blockchain-in-construction-an-exciting-future-ahead

Supply chain management is one of the biggest challenges faced by stakeholders in the construction sector. Blockchain technology can be applied to all stages of supply chain management to ensure quality control. From the design to materials procurement to construction, blockchain can ensure that all materials meet the required standards.

The blockchain helps build a system that identifies the origin of materials, checks for compliance, and quality at every step of the way. It can create a transparent system where all stakeholders can see – what's going on at any time.

Besides ensuring quality control, blockchain can build an efficient supply chain ecosystem that reduces redundancy and inventory, building trust and transparency among all stakeholders.

2. Smart Contracts

blockchain-in-construction-an-exciting-future-ahead

Blockchain technology allows for the creation and execution of smart contracts. A smart contract is a self-executing digital contract. It can automatically transfer an asset/currency or implement a particular set of actions, once a predetermined condition is met.

Smart contracts can be used in several ways – to track intellectual property rights, to automate payments, to transfer ownership of materials and equipment. It reduces the need for paperwork shuffling between intermediaries.

To give an example, a payment sent to a supplier in Location A can automatically commence delivery of materials in Location B, and so on.

3. Smart Cities

blockchain-in-construction-an-exciting-future-ahead

Blockchain has the potential to connect all the revolutionary technologies of a smart city. Here's an illustration of the possibilities of blockchain in powering intelligent cities. Imagine a future city that has a decentralised ledger. Every house/apartment has a node on the ledger containing all essential information like – property ownership, property tax assessment, utility use, mortgage balance, and more.

The city’s governing office can use these data to provide people with enhanced services without compromising the integrity and privacy of the information. Blockchain can simplify bureaucratic procedures and improve utilisation of the city's services.

4. IoT (Internet of Things)

blockchain-in-construction-an-exciting-future-ahead

Today, any event in the construction site, such as site conditions, failure of materials, safety incidents, and weather conditions, is manually entered into a system. IoT sensors can automate this process, thereby providing reliable site information in real-time. When the IoT sensors are connected to the blockchain network, it provides for greater accountability.

5. Efficient Planning

blockchain-in-construction-an-exciting-future-ahead

BIM (Building Information Modelling) and blockchain can be used together to collect real-time information across the system and present it to stakeholders securely and reliably. Project managers can monitor project progress and update the information in real-time.

BIM and blockchain can be used to create an audit trail of the design process and avoid any clashes between approved design and construction quality. It can help monitor and manage the project throughout its life cycle, from design to construction to asset management.

6. Labour Force Management

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One of the biggest challenges of the construction industry is ensuring timely payments to all stakeholders. Blockchain can help in enhancing the accountability and integrity of payments by providing secure and traceable payments. It can help governments monitor the implementation of labour laws, and violators can be identified. Additionally, the payments made downstream to sub-contractors, and workers can be monitored and implemented correctly.

By using smart contracts, payments for contractors can be automated based on the real-time data gathered. Other benefits include eliminating blocked invoices, reducing the time spent on contractor onboarding, better compliance, regular payments, etc.

What’s the road ahead?

blockchain-in-construction-an-exciting-future-ahead

Several organisations are already testing and prototyping blockchain-related projects in the construction sector. For example, Tata Steel has launched a pilot project along with IBM, SAP, and Arup to enhance construction procurement. It’s only a matter of time before more blockchain-enabled projects are rolled out in the construction sector.

Stay tuned for further developments!

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