Blockchain is the technology that powers Bitcoin and other cryptocurrencies, but its value extends far beyond the world of finance. Although this technology may not be ready for prime time in construction just yet, industry experts recognize its promise to transform the way projects are managed.
The technology behind blockchain is sophisticated. The concept, however, is simple: It’s a shared database — or “digital ledger” — that’s continuously copied, updated and synchronized on thousands or even millions of computers maintained by various third parties.
This lack of centralized storage or control makes it extremely difficult for anyone to hack into or tamper with the database/ledger, which can accept new transactions only if they’re verified by these third parties through established consensus protocols.
Blockchain’s ability to produce validated, immutable records that are readily available to all parties helps establish trust while minimizing the need for intermediaries to authenticate or certify transactions.
Consider “smart contracts,” for example. By using blockchain to create and execute construction contracts, the parties can ensure that they’re literally on the same page. The technology eliminates confusion by maintaining only one version of the contract, which is virtually impossible for someone to modify without triggering all sorts of alarms. If a change or correction is required, it can be added to the blockchain, together with appropriate explanations and supporting documentation, creating a permanent audit trail.
Smart contracts can also be used to automate processes, cutting out the “middleman” and avoiding delays. Suppose a construction company has engaged a vendor to supply certain building materials to its projects. If the vendor affixes radio frequency identification tags to the materials as they’re shipped, the parties can track their movement and determine when they’ve been delivered to a job site.
Once the materials have been inspected and approved (using a digital signature), the smart contract determines whether the vendor has delivered the materials on time and met any other contractual terms. If so, the system initiates an electronic payment to the vendor. If the vendor fails to meet contractual requirements, the smart contract documents this fact, alerts the parties and can even track the delay’s impact on related construction activities.
Blockchain has the potential to automate, record and track a variety of job-related transactions. At some point in the future, it could ensure prompt payment of contractors and subcontractors, enhance transparency, prevent delays, and minimize disputes. In other words, blockchain’s potential is virtually unlimited. Keep an eye out for it to become more commonly used in years ahead.