Blockchain in Construction Industry: What to expect?

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The construction industry has evolved folds. Be it the tools used to plan the construction or the very way in which we construct our buildings and the infrastructure around. Nevertheless, the industry has been criticized for the impedance it has sported to any change that has come its way. This nature has been costing the industry right where it hurts. Productivity and consequently, money. Interestingly, pilot projects to test out new techniques and tools should be way easy to spot in the project-based industries compared to product-based industries.

However, as the product-based industries embrace cutting-edge technologies and state-of-art management techniques and as the construction industry keeps its skepticism ahead of conviction, the contrast keeps getting significantly evident.

The dimension of sharing information and knowledge witnessed an unmistakable paradigm shift with the invention of the world wide web. Today, there is no industry that does not use the internet. Researchers foresee a possibly similar trend with Blockchain. Blockchain, sometimes mistakenly considered synonymous to Bitcoin, is the infrastructure which supports Bitcoin and other cryptocurrencies. Before we discuss the opportunities of Blockchain for construction industry, let us decode what a blockchain is.

Photo by Ivan Bandura on Unsplash - Blockchain in Construction Industry - an aerial view of a large construction site - refine

Blockchain: Decoded

Blockchain, as the name denotes, is essentially a chain of blocks. These blocks usually have three vital components. Data, hash and the hash of the previous block. That sounds pretty simple. Doesn’t it? Dig deep and you will find why a blockchain is the star it is hailed to be. Let’s begin by scratching as much to understand the components.

Data:The data can be anything from as simple as transaction information, as in the case of a Bitcoin, to files or even meta data. The data stored in blocks depends on the intended use of the blockchain like smart contracts or cryptocurrency or any other field for that matter.

Hash:The hash can be dubbed as a digital fingerprint. It emerges when a block is created. Changing anything in the block would change its hash and thereby rendering the block invalid. This is one of the prime pillars of the blockchain algorithm that ensures the security of the network.

Hash of the previous block:This is what helps in creating a chain out of the blocks that have been formed. A segment in the block directs to the hash of the previous block ensuring that the sequence is in order. Always the ‘(n)’th block directs to ‘(n-1)’th block with an exception to the first block as it does not have a predecessor and therefore is termed a ‘genesis’ block.

The security of the data that is in a blockchain is ensured by making the blockchain a peer-to-peer network and by copying the same copy of the chain in every participant’s ledger. The entrance of a block into the chain requires everyone in the network to approve the block for its authenticity thus enabling a consensus mechanism. For a general understanding, we can look at this as an open ledger where the concerned can enter relevant data and once everyone in the network approves the data, an entry in the form of a block can be made.

Features to look out for

Blockchain and its features are expected to be transformative and to take industries by storm if picked for its certain features and thoughtfully implemented. As the case in hand is the construction industry, here are the features that make Blockchain a prospective blue-eyed boy of the industry:

Digital time-stamping:

Fragmentation is natural to the construction industry and instead of battling the nature of the industry, we should rather embrace the technologies which can help us solve the hassles which fragmentation brings. As the industry requires more specialization, fragmentation has in fact furthered. The exchange of data and information between stakeholders with usually varying project interests is more frequent than ever. There was no issue as long as the information was in the form of time-stamped documents printed on a paper. With digital documents in form of BIM models being introduced, a transaction will have to be time-stamped for legal purposes. The digital model transaction has been highlighted as the main issue of BIM implementation. If this feature of the blockchain can be researched objectively, the shortcoming that is stalling full-scale BIM implementation could probably be overcome. Since the time-stamping is done cryptographically, it is practically impossible to overwrite once entered as in the case of a paper document.


Consider a BIM model in a big building project. Ideally, if we are to tap the efficiency of using BIM in a project, the model should be accessible and modifiable by different stakeholders at the same time. But, the problem of tracing the changes made springs up and an update in one model might end up colliding an element in another. Dealing with variations might as well turn out to be a litigation problem. In case the workflow is attached to a Blockchain and is tracked in a database that cannot be tampered with, what might turn out to be an expensive litigation issue might as well be avoided. This way, we can also trace the ownership of the digital property at critical junctures and interorganizational record keeping turns out to be more transparent.

Consensus mechanism:

With a high number of stakeholder participation in a project, more often those who have not worked together previously, reaching consensus on a change in a model is a challenging task. If all the authorized stakeholders can confirm consensus on a particular change in the model or raise concerns regarding the amendment, a swift flow in the organization of the BIM model may be achieved. A version file may be floated in order to achieve the consensus and once all the stakeholders confirm their acceptance, the accepted model may be stored in a block and thus store a series of change in the versions of the model in the form of a chain.

Transparency and trust:

Collaborative management principles that are claimed to be the future of construction delivery processes such as IPD will have stakeholders cofunction to achieve the objective of the involved project. Although, such a case of collaboration does solve a major problem; it gives rise to new problems that may be called ‘side-effects’ of an attempt to alleviate some other problem. One such problem that arises is tracking the appropriation of the resources and the subsequent value being added by a particular participant. Or, rewarding the value adding decisions or improvements brought into the project cycle. Chaining such a resource and value pool to a blockchain ledger will result in transparency and will nurse the trust between the participants which is imperative to achieving the objective of the project.

Photo by rawpixel on Unsplash - Blockchain in Construction Industry - picture with connected hands in the middle symbolize trust and team spirit - refine

Smart contract is another promising application of the blockchain technology that will have to be tested for its applicability. Although the forecasted applications and the possible outcomes seem rewarding, this would need a major overhaul in the complete setup. All the contractual conditions that currently exist on a piece of paper will have to be coded. Then the series of ‘if-then’ conditions will self-execute on meeting the conditions and approval by the concerned. This would mean reduction in waiting time for the payment and thus mending out a major hurdle from the perspective of a beneficiary.

With the number of cryptocurrencies that are under circulation in the market, one may unmistakably consider that the finance sector did succeed in implementing the technology. Although the success did take a solid number of years to be recognized, it certainly has tipped the scales in favor of blockchain and has made the other industries to look at it as a possible solution to the challenges faced.

Construction industry, which is ripe for a digital change, may as well accommodate this disruption so that the industry is holistically digital. It is understandable that the culture does not allow impulsiveness in adaption of technologies. Particularly those that need imparting of knowledge that is foreign to the industry. Nevertheless, this will have to be counteracted by researching ways to impart digitization into a work culture without having to jab. Embrace.

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