How Blockchain is Disrupting the Construction Industry

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We are seeing the emergence of a second digitization revolution that could be centered around the new blockchain technology.

Chapters
0:00 Introduction
0:37 First revolution
1:16 Second revolution
1:34 What is blockchain?
3:13 Smart Contracts
3:50 Sponsor
4:27 Skilled Labor
4:57 Payments
5:36 Supply Chain Management
6:28 BIM
7:13 Drawbacks
9:13 Conclusion

Blockchain is a digital ledger that stores information in records called blocks. Each block has three main components: data like timestamped transactions or agreements, a hash which is a digital fingerprint or unique identifier and the hash of a previous block. These blocks are linked together chronologically, like a chain of blocks. You cannot make a change to the information in a block, instead you create a new block, chained to the last block.

Cryptography makes the blockchain ledger secure. Each transaction is recorded using encrypted data. If someone tries to tamper with data, the change will result in a new hash. By comparing the two root hashes, users can see that the data is compromised.

Another key advantage of the blockchain technology is trust. In order for business transactions to be executed, trust must exist between management and the employees of an organization and between an organization and its partners or customers. Trust isn’t built into the current version of the internet and we don’t trust each other.

The current media attention and hype around blockchain is mainly due to cryptocurrencies like bitcoin. But that is just one way of using blockchain technology. Let’s look at some other practical applications in architecture and construction.

SMART CONTRACTS
Construction projects usually involve a large number of companies. You typically have to wait to get contracts, change orders and addendums from all the parties. You have to pay all the companies involved and wait for their status reports. Blockchain allows us to set up smart, digital contracts with a centralized tracking system. The companies involved define the rules, deadlines, and penalties before the project starts. The blockchain automatically enforces these rules during the project.

SKILLED LABOR
Through blockchain, vendors and suppliers can use unique identifiers to record their performance and grow their reputation. LinkedIn listings and resumes are self-reported and unchecked but the blockchain is the “source of truth”. It can be easier to verify a company’s credentials and check their past roles before hiring them. You can vet candidates and identify recruits more easily.

PAYMENTS
Late payments and cash flow issues are continuing problems in the construction industry. Transactions between parties usually include invoice errors, payment errors, bank holidays, currency conversion fees, etc. The average payment time for small and medium sized companies is over 80 days. This can put the whole supply chain at risk.

SUPPLY CHAIN MANAGEMENT
The fragility of our global supply chain has been exposed over the last two years. Blockchain systems can improve their robustness because materials are logged and traced, delivery time is easier, quicker and less bureaucratic. Dispute resolution is faster. You have better control of inventory and you can order and receive goods as needed which reduces waste. This can lead to lower costs and faster schedules.

BIM & SMART ASSET MANAGEMENT
Building Information Models can act as a single source and dashboard of all information. All the parties would be working to match the physical construction to the BIM model. Any deviation from the model would result in penalties. BIM models can contain supply chain information, source of materials, payment details, revisions, etc. By combining BIM and blockchain in smart contracts, you can make payments, send out material orders, hold subs accountable and improve transparency, communication and workmanship on a project.
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SOURCES
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#blockchain #bitcoin #cryptocurrency #construction #technology #disruption

[BelindaCarr]

I've spent the last 4 years being very skeptical about blockchain and crypto. Since then, it has become a self-fulfilling prophecy as the "future of work". What do you think about it?

[bfalmada]

That's like using Machine Learning to solve basic math operations. Instead of trying to find a solution to an issue, people are trying to fit a "solution" to anything until they find the matching problem...

[dougrattmann]

I am a software developer working for a large US electrical contractor -- I personally see no value add from "blockchain" or crypto technologies that can't be provided by traditional APIs.

[spidythe]

Sounds more like shoehorning than disruptive. Like many comments here, I also don't see benefit of inserting blockchain into construction contracts. Change orders and addendums take time to approve because parties need to review, clarify, and agree on the change in scope and fees before accepting, we can't automate this process. Also, you can't automate the process of applying penalties to contractor without reviewing the cause of delays etc.

[brightsausage]

i dont want to be inflammatory but this seems a lot like
1) problem
2) blockchain magic!!!!
3) no problem

[chhb]

People disputing contracts is not actually a problem, also blockchain can't "enforce" anything, shit still needs to be reviewed, set up, agreed to and executed

[dsnein]

Sounds more like blockchain tech is still a solution in search of a problem….

[Lex_Araden]

Perhaps this is just me being dumb, but as someone who understands the block chain tech it took me 2 watches to follow what the use case for block chain is for the construction industry.

One issue for using block chains for things other than the possession of a unique token is that the size of a transaction (such as a contract) can grow quite large, and everyone who takes part in this technology will have to have access to each contract (which will take up a bunch of space and share information that might want to be kept private for competition reasons). If you try to use just a reference to a id stored in a block chain you lose a lot of the security you are using the block chain to protect against.

I am also surprised given the pessimism you show in a lot of other areas, that you came down so light on block chain.

[HllwnX]

I don't see blockchain being useful in this field, there are so many less complex alternatives.

[betruetoyourself]

I fail to understand how blockchain will aid in construction. I feel that change orders drive up the contract prices and cause inefficiency. Inputting contracts and change orders do not affect efficiency.

For example, if a contract is created using blockchain and everyone agrees, then someone wants to do a change order, but some engineer will still need to re-spec the job and re-design it. Then input the changes into the blockchain. Approvals will need to still be approved by owner, general and subs. Costs would need to be re estimated and then translated to each industry worker.

[joels]

There's too much hype around blockchain. A regular database would be fine (or better).

This is also assuming clients want to have a decentralized database, essentially a 3rd party arbitrator involved in every interaction, which is shared by everyone. They don't. If you delay approval of change orders and hammer the contractor on schedule you can screw the contractor. This happens on every job I've ever been on. It's a constant fight to keep Superintendents from performing unapproved work (because they're schedule driven), which all gets kicked to the forensic accountants at the end of the job. An intermediate 3rd party to enforce change order approvals would be very detrimental and costly to clients.

[hyenatron]

How can something digital enforce anything in the real world? There still has to be human trust in the system, and right now with how easy it is to scam on the blockchain, that just isn’t going to happen. Not gonna support anyone who’s trying to hawk this kind of con.

[ZekLullaby]

I really think all those companies are overestimating what blockchain can do, most of those applications can be achieved without it, some of them in more logical ways, like for example contracts, not to mention privacy concerns.

They are just changing an intermediary for another one with the hope that since it's a newly developed technology will somehow be better than the current mechanisms. I guess we will need to wait and see how everything develops, but I don't have much faith on it, if I'm being honest.

[mr.hi_vevo]

You're good at dismantling faux innovations like 3d printed houses, but why aren't you doing that here? Blockchain has been a solution trying to find a problem since crypto got popular. None of these things require Blockchain tech or would even benefit from it. I hope you can do more research and correct this video.

[frostaegis]

uhhh... I disagree.
There is a chinese legend according to which an architect calculated the number of bricks required to build a palace. When the workers questioned him on his calculations, the architect bought a single additional brick. Once the palace was completed, the architect placed the single additional brick upon the arch of the main entrance as a reminder of the accuracy of his original calculations.

The problem with modern industry is the phrase "as needed". It is a trap and is the cause of disputes and delays. These hitches of "as needed" snowball into more and bigger issues as they travel down the supply chain. The idea of the savings is a false promise, a mirage people trick themselves with, when conventional wisdom is to maintain a stockpile of goods, rather than to purchase what is needed when it is needed and that is precisely why we are in a time of global shortages.

[LegandsandLabyrinths]

If you just substitute "pixie dust" for "block chain" in this video nothing would change.

I unsubscribed.

[mankepoot]

As someone who has witnessed the Cad revolution in the architectural field, i can tell you that it did not lead to efficiency. The budget for the planning stage remained the same, it is just that we invented a lot of information that should be communicated. When you consider a hand drown plan from 30 years ago with a comparable plan today, you will see a lot more black ink now. Most of this information is only there to please project management proces control surveyers and other people of that sort. Burocracy has grown exponentialy, partly due to the more complex technology, but also because jobs could be created.

[jakesyaseen]

Big business, engineers, architects, construction industry managers, freighter air, sea, rail road couriers are watching your channel

[halycon]

I'm going to make a wildly blanket statement here that so far has turned out to be true. Blockchain is never an answer to anything. There is always a simpler solution that already exists. Blockchain is a neat thought experiment looking for a problem it can be a solution to. Unfortunately neat thought experiments never really work in the real world.

[known]

I can't see how what you describe at 2:50 can't just be equally accomplished using public/private keys. Also isn't the blockchain itself effectively just swapping itself for that third party and having basically all the same drawbacks.