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Blockchain in Construction: the digital revolution that is transforming the construction sector

Blockchain in the construction industry helps to create a secure and reliable database containing the history of data exchanges made between users. Find out all the details about this new technological trend!

The construction industry has traditionally been very reluctant to change and rather slow in adopting new digitisation technologies.

In recent years, however, we have seen the introduction of Building Information Modeling, which has greatly improved the productivity and efficiency of the construction sector, and we are taking the first steps towards a new digital transformation focused on the connection between BIM and Blockchain.

Known as the technology that powers Bitcoin and other cryptocurrencies, Blockchain is in fact also offering significant opportunities for use in the AEC (Architecture, Engineering and Construction) sector, and several companies are already experiencing its advantages and potential.

Before we find out how this technology will revolutionize the future of construction, let’s try to understand what the term “Blockchain” actually means.

What is Blockchain?

Blockchain is an innovative technology that allows anyone to store digital information, which cannot be altered, copied or duplicated, because it is unique in itself.

Unlike traditional storage methods, which provide a central repository (particularly subject to security attacks) from which data can be accessed from anywhere, the Blockchain is based on the creation of a distributed virtual distributed virtual register (tamper-proof), in which data is shared, stored and verified by the who manage the register in chronological order and without the need for an intermediary.

In very simple terms, the Blockchain can be considered as a chain of blocks containing information, the integrity of which is guaranteed by the use of encryption. Once the information is recorded within the Blockchain it becomes virtually impossible to modify. Each block of the chain, in fact, contains three essential elements:

  1. the data stored in that block, which depends on the type of Blockchain (for example, the Bitcoin Blockchain can record in each block the details of a transaction, such as sender, recipient and amount exchanged);
  2. the hash, which is a fingerprint consisting of an alphanumeric string that uniquely identifies the block, and which varies whenever changes are made to the data contained therein;
  3. the hash of the previous block, essential to start the chain and make the Blockchain extremely secure; if a block is tampered with by a hacker, in fact, the hash of that block is automatically modified, the subsequent blocks will no longer be able to recognize it and the entire chain will be compromised.
Blockchain: contents of the single block

Blockchain: contents of the single block

To ensure greater security, the Blockchain also uses a protocol called Proof of Work, which consists of a request for additional calculations necessary to slow down the creation of new blocks and make any hacking operations more complex.

A further feature of the Blockchain, which helps to increase security, is decentralisation. Blockchains, in fact, use a peer-to-peer network (literally “peer-to-peer”), in which each node communicates directly with the others, without the mediation of a server. When a node creates a new block, this block is sent to the other nodes in the network, which can then verify its correctness even before it is added to the Blockchain.

Although it is still in its early stages of development, Blockchain technology has all the potential to revolutionize the construction sector for the better, simplifying and accelerating traditional design practices. Let’s find out then what are the possible applications of Blockchain in the construction industry, and how this technology can be able to conveniently transform the industry.

How Blockchain is revolutionizing the construction industry

The construction industry is going through a digital transformation and an update of its business practices, and in this scenario Blockchain technology has the potential to greatly influence and facilitate these changes.

With its ability to record and protect a huge amount and variety of transactions, Blockchain provides a reliable infrastructure for managing information throughout all phases of the project lifecycle.

The innovations introduced by this powerful technology are able to replace the traditional methods of the construction industry with more modern and advanced methods, based on four fundamental principles:

  1. Decentralization: Blockchain is a distributed registry, which allows simultaneous access to all network users to view and verify stored information;
  2. Security: all data is safeguarded and protected by cryptographic codes;
  3. Independence: the changes that take place within the Blockchain are confirmed and verified directly by the participants themselves, avoiding the need for an external authenticator.
  4. Smart functionality: The Blockchain can be used to execute algorithms that can automatically execute specific commands, as in the case of Smart Contracts, shown below.

How is Blockchain used in the construction industry

Blockchain technology is an efficient and transparent means to automate processes and increase trust between the parties involved in construction projects. Among the most interesting applications of Blockchain in the construction sector we find the so-called Smart Contracts.

A Smart Contract is a self-executing contract between the customer and the trader, manufacturer or firm providing goods or services. This type of contract provides for the definition of a historical scheme in which the project steps are detailed. For each individual phase a budget is determined, and the funds of the entire project are collected and deposited in a cryptocurrency-based wallet. Each design phase is connected to a Blockchain block, which has specific conditions and results to satisfy. Once the contractors have completed the task and the work has passed the inspection (or the goods to be delivered have been received), the block is accepted and added to the chain, and the system automatically pays the pre-established amount to the corresponding parties, directly accessing the project portfolio, and applying penalties in case of delays or defaults. This system, in addition to greatly simplifying the payment process, also eliminates any dispute about remuneration.

Blockchain technology in the construction sector can also be effectively used to:

  • Manage the supply chain: Blockchain can help track physical objects from source to final destination, and plan activities (or material shipments), starting the next phase only after the previous one has been completed, saving time and money.
  • Archive data: the Blockchain allows you to create a verified, immutable and permanent data repository, containing all the documents of the project, in relation to the progress. The ability to record key information such as the author, time of creation, or version of the document can facilitate compliance with legislative requirements and dispute resolution processes.
  • Processing payments: the concept of blockchain is built around monetary exchange, so this technology is mainly used to simplify the processing of payments, which will be paid more quickly to stakeholders, increasing security and creating traceable information.
  • Track information exchanges in BIM: Blockchain application in BIM projects allows you to use peer-to-peer networks for information sharing, and make updates in real time. Constant monitoring of information exchanges ensures greater transparency (testifying that all phases have been carried out correctly and according to the required standards) and helps to improve communication between the parties involved. The combination of BIM and Blockchain also helps to improve the effectiveness of Smart Contracts. For example, the BIM model can be used as an integral part of the contract, therefore the figures involved will work to match the actual physical construction to the digital model of the building, and any deviation from the BIM model will automatically result in rework and changes to orders. To discover the full benefits and potential of integrating BIM and Blockchain, read this article as well.
  • Manage resource maintenance: All project lifecycle management data can be stored and maintained on the distributed log of a Blockchain. Major applications of this technology in Facility Management include, for example, digitization and monitoring of resources, management of HVAC systems, integration with smart devices (IoT), etc.
Blockchain: applications in the construction sector

Blockchain: applications in the construction sector

Of course, those just illustrated are just some of the possible applications of Blockchain in building design, construction and management processes. This emerging technology is in fact destined to drive the digital transformation of construction in the years to come, offering the sector numerous opportunities to become increasingly competent, clear, productive and sustainable.

If you want to experience the advantages of Blockchain technology in your BIM design process, you can rely on a BIM management system that integrates a specific application to record any project document on the Blockchain (IFC models, models in proprietary format, pdf files, images, etc.). In addition to ensuring the transparency, verifiability and effectiveness of information exchanges between the different parties involved in BIM design, the Blockchain application also guarantees the authenticity and immutability over time of any file stored on the sharing platform.

What are the advantages of Blockchain in the construction industry?

As part of the construction process, Blockchain makes it possible to simplify project management, improving communication between the parties involved (designers, companies, suppliers, etc.) and ensuring maximum transparency and traceability of data. But the implementation of this technology also allows you to:

  • improving decision-making processes;
  • eliminate cumbersome paperwork;
  • automate the execution of contracts;
  • limit manual checks and controls;
  • streamlining the supply chain;
  • reduce administrative costs;
  • protect intellectual property;
  • simplify payments;
  • reduce disputes.

What are the challenges associated with implementing Blockchain?

The potential benefits of Blockchain for the construction industry are exciting, but the digital revolution is only just beginning and there are still many obstacles to overcome before this technology becomes common practice in design processes. The most important challenges to face for the complete and widespread application of Blockchain are mainly related to:

  • scepticism, as clients, professionals and businesses are still reluctant to adopt this efficient system in their day-to-day operations;
  • the lack of resources, because to implement the Blockchain it is necessary to create a variety of complex systems, which have a high cost and require the intervention of qualified and expert people in the field;
  • the inadequacy of the market, which unfortunately is not yet ready to accept such innovation, but which is gradually making the necessary efforts towards change.