5 Reasons the Construction Industry is Adopting Blockchain Technology and Smart Contracts
What do the construction industry and Bitcoin have in common? Their use of Blockchain technology.
Blockchain has been widely adopted by the construction industry because it facilitates Smart Contracts. Smart Contracts enable streamlined project management and significantly reduce administrative error by digitally tracking progress.
In this article, we explain how Blockchain and Smart Contracts function, and identify 5 key reasons why the construction industry is shifting towards these digital practices.
What is Blockchain?
Blockchain refers to a series of data “blocks” that form a distributed ledger, or collection of accounts, of all transactions and contracts that make up a project. An effective project management system, Blockchain technology enables multiple people to collaborate on a project and easily define milestones.
So, how does this link to Smart Contracts?
Using Blockchain technology, the construction industry employs Smart Contracts to serve as digital alternatives to written agreements. This management method is more secure and accessible because it mitigates the need to make multiple copies of a contract. After all, team members can simply access information through the cloud.
Furthermore, with Blockchain, once a certain transaction or contract has been approved, it is automatically locked, and the next phase of the project can begin. This chronological sequencing makes it easier to track progress and ensures that changes or delays to a project are traceable to their point of origin. This significantly reduces the time spent manually overseeing each activity on a project.
Now that we have a better understanding of what Blockchain and Smart Contracts are, let’s have a look at 5 reasons why the construction industry is adopting these technologies:
1. Quickly Processes Payment
One of the most significant pain points for the construction industry is chasing payment from clients.
Typically, construction firms turn to legal professionals if a client fails to uphold their end of the contract. Whether the discrepancy occurs at the end of a project or during the construction phase where ‘progress payments’ have been established, traditional contracts require an authoritative third party to enforce the terms.
Smart Contracts mitigate this frustration by automatically triggering payment when a predetermined construction deadline is met. If either side fails to uphold their responsibility, a fine or penalty system can be implemented. This ensures that funds are guaranteed and keeps both parties accountable to their obligations.
2. Streamlined Supply Chain Management
Large scale projects require frequent communication between many suppliers to ensure each project phase is on track for completion. This can be incredibly time consuming and tedious for project managers.
Blockchain enables construction firms to streamline this process by tracking materials, equipment and rental timelines in a single digital location. With Blockchain, each collaborator on the project is given a unique ID or digital key to track their own work and ensure they produce their deliverables on time.
3. Supports Asset Maintenance
The Blockchain distributed ledger can track information on every piece of equipment in a project, such as certifications, warranties and replacements.
Blockchain uses Building Information Management (BIM) technology to set up a digital model of the construction project. This feature ensures the project adheres to set budgets and timeframes and serves as a virtual host for all project assets so they can be quickly quantified and searched. Blockchain can automatically notify users when a piece of equipment has reached the end of its life cycle or requires maintenance if backed by artificial intelligence.
4. Increases Transparency
All construction projects must undergo inspections and adhere to a strict code of standards. The centralized and streamlined structure of Blockchain documents makes it significantly easier for compliance officers and clients to find information on a project.
An added benefit of Blockchain is that firms can upload specifications to their profile to facilitate easier collaboration between contractors and trace any requested changes to a building plan.
5. Better Collaboration
Many people compare Blockchain to Google Docs because it allows multiple people to access and collaborate on a document. This functionality increases transparency and encourages team members to suggest potential improvements to a project when it occurs to them, rather than waiting for the next meeting.
Smart Contracts are designed to protect the document from changes that might negatively impact the workflow. However, this does not mean that changes cannot be suggested, merely that they will need to go through a standardized review process before the changes are applied.
How Can Cloudscene Help?
Blockchains and Smart Contracts are impossible to set up without adequate cloud storage and a reliable internet connection.
Cloudscene can help digitize your operations by connecting you with our database of industry-leading service providers. Whether you need internet, network fabric, colocation or cloud-based services, simply outline your requirements, and we’ll connect you with a vendor that's right for your business.
Want to learn more? Get in touch with our friendly team to explore the platform and see how we can help your team save time and money on network services.