blockchains offer several promising innovations for the world of construction,
especially when it comes to managing all of the data that is required to erect
buildings today. This matters not only because it would make the jobs of
architects, builders and inspectors easier but also because it would provide
badly needed cost-efficiencies for the construction industry.
The Construction Industry’s Challenges: Cost and Information
assume that the cost of constructing a building has gone down significantly
over the past century because building materials and methods have become less
expensive. But you’d be wrong.
true that building supplies and the labor costs associated with them have
become more affordable. Drywall paneling has replaced labor-intensive plaster
installations. The huge, unwieldy timber required for balloon-frame
construction has been supplanted by less expensive commodity studs used for
platform framing. More recently, plastic pipes have taken the place of costly
copper and cast iron in many buildings.
despite all of these cost-effective innovations, the median home price in 2000
was almost four times as much as the inflation-adjusted price
in 1940, before many modern construction innovations had come into play.
reasons for this “cost creep” are many and varied. Labor has become more
expensive, the average home today is larger and safety standards have grown
more rigid. Blockchain technology can’t do much to address these core issues.
fourfold increase in median home prices is very steep, and these factors alone
do not explain it.
critical issue driving cost increases in construction — and one that blockchain
technology can help to solve — is the difficulty of managing all of the complex
information that is required to construct a building today.
complexity is a significant challenge for the construction industry today. In
contrast to the earlier 20th century, when construction materials tended to be
sourced locally, building requirements were more lax and decisions about
building design details — where exactly to lay pipes or run wires, for example
— could usually be made on the job site, today’s construction industry relies
on a wealth of data that can be difficult to manage and communicate
efficiently. This adds up to increased building costs.
construction materials are sourced from around the world, and problems with
scheduling or the delivery of one item can snowball and hold up an entire
project. Modern building designs, which are often created by architects who
never visit the construction site, include a huge amount of detail that
builders must interpret effectively in order to avoid safety and liability
risks. Property purchasers have little means of ensuring that builders do what
they promise, especially because many of a building’s crucial systems are
hidden in inaccessible places where even professional building inspectors
cannot detect problems.
Using Blockchain Technology to Improve Construction
distributed ledgers to store and share data, the construction industry can
achieve three main innovations that will help to reduce building costs and
Building Design Data
of relying on centralized Building Information Modeling (BIM) platforms to communicate
information about building design, architects, builders and building inspectors
could move building design data to a distributed ledger.
advantages of this approach include ensuring that a change made by one party
(such as a builder at the job site who realizes that a certain detail of a
building design cannot be implemented as specified due to a problem unforeseen
by the designers) to building plans are communicated transparently to all
of immutable, distributed data would benefit investors, inspectors and
architects in commercial as well as residential construction. And for the
homeowner, it’s easy to imagine the advantage of having an immutable record of
a home’s design and construction. If you have ever wondered, for example, where
to cut into a wall in your house in order to tie into existing wiring and
install a new outlet, you know that it’s largely a guessing game because you
have no record showing exactly where wiring was installed. If building plans
were stored on a distributed ledger where any interested party with permission
could access them, even decades after a building’s construction, this type of
information would become easy to obtain.
Fraud Through Smart Contracts
building planning and construction records to the blockchain would also help to
combat fraud by enabling the use of smart contracts. Instead of relying on
building inspectors and conventional contracts to ensure that buildings are
constructed as promised, smart contracts could prevent a builder from being
paid or an item from being crossed off the job list, until the blockchain
confirms that a certain condition is met.
near term, verifying whether requirements have been met might require manual
inspection in many cases. But it’s possible to envision a future where smart
devices allow this data to be collected and fed to smart contracts
automatically. For example, pipes — which can already be regulated and
IoT technology — might include sensors that can confirm which type of material
they are made of and where they are placed within a building. The sensor data
would allow a smart contract to confirm that pipes are installed according to
building specifications, even if they are hidden behind walls or in concrete
slabs. In this case, sensors and smart contracts could virtually eliminate the
risk that builders would lay an inadequately sized pipe or install one in an
unsuitable location (such as along an exterior wall where it could freeze)
without being caught.
Supply Chain Management
supply chain management is a key use case for blockchain technology
across a variety of industries.
building material can’t be delivered on time or the wrong material is shipped,
the builders who are affected by these problems have limited ability to
discover them ahead of time. If construction supply chain data were moved to a
distributed ledger, however, they would be much better positioned to anticipate
material delivery issues or defects and plan accordingly. For instance, if a
builder knows that there has been a manufacturing delay with drywall panels
that he planned to receive and begin installing in a week, he might switch his
focus for the time being from installing interior wall studs (which will be
used to hold the drywall) to sheathing the roof (which can be completed without
waiting on the drywall delivery) in order to avoid wasting time.
these innovations would help to reduce the risk and inefficiencies that
contribute to the spiraling costs of building construction, while at the same
time making buildings safer and easier to manage for the people who live or
work in them.
blockchain-based innovations within the construction industry remain mostly a distant
vision; few companies have begun implementing them. But organizations such as
the Construction Blockchain
with the goal of driving the types of innovations described above. And
blockchain startups like BitRent are using distributed ledgers
to enable a greater degree of transparency into construction projects for
people who invest in them.
technology may not disrupt the construction industry as quickly as it does others,
but the need is clear and the technology is already making inroads.