Blockchain Community

The introduction of new technology into existing sectors can and does come up against similar and familiar barriers.

Replacing legacy systems, legacy processes and familiar practices are often the biggest barriers.

The learning from the uptake of Building Information Modelling (BIM), is a case in point.

The processes and technology underpinning BIM have been around for over 30 years.  Despite countless pilots and empirical evidence showing BIM processes and tools can save between 5% to 30% of construction costs and deliver a range of other benefits, adoption rates are still relatively low.

Governments around the world are now looking to mandate BIM in order to boost adoption rates, but while this is having an impact the inertia to change is still evident.

Evolution & Revolution

Major change, in particular fast moving technology change, can impact people in many ways.

Job roles change; there are new workflows to comprehend; different processes; new training; increased uncertainty; different reporting layers; impact on behaviours; the threat of reduced pay; business risks; and the fear of job loss.

Challenge is also an import and often beneficial aspect of change that can hold back progress. Just because someone says something new is good, doesn’t mean it will be.

These factors also have to be seen from the context of people being asked to introduce new ‘stuff’ while still facing daily pressures to keep existing processes and business working smoothly until any transitions take place.

Blockchain is such a transformative technology which can impact just about every business process.  Those who move beyond the ‘what is blockchain?’ phase quickly recognise the many material benefits that the technology can bring.

Within the construction sector, however, wholesale change to introduce blockchains is already being seen as a new change on top of an existing major BIM implementation that is still going through early stage adoption.

Blockchains are such a major breakthrough that the challenge could be to find a balance between incremental evolutionary change and wholesale revolutionary change.

 

Blockchain Community

Breakthrough technologies often have to go through pilots and while these are valuable test beds, they can be limited by scope and context if they have a very narrow set of parameters within which a pilot can demonstrate whatever it is that the terms of reference are built around.

Then there is the argument that one pilot does not make a strong enough business case.

Creating an environment where any and all new technologies can be tried and tested is the ideal scenario.

New and existing ways of working can be deployed to provide a balance between leading edge and tried and tested ‘get it done’ for the best overall outcome.

Real world deployment on an industrial scale is an option that can encompass multiple pilots, while working towards building something tangible.

And what can be more tangible than building an actual community?

As the blockchain landscape is still completely open uncharted territory , the opportunity exists to address specific pilots within industry and to have parallel development on projects with wider scope.

 

see Technology Businesses Building Communities

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There is a recent trend of technology companies moving into creating master plan communities, primarily to test new technology.

The reasons for these organisations moving into creating living spaces varies from a need to provide accommodation for essential workers to testing new technology.

The attractiveness of multi-use managed communities is the range of property types that are required to be built, such as retail, hospitality, healthcare, offices, schools, etc.

Master Plan Communities

 

Building these communities can be beneficial for all those involved, including investors, as can be seen from the increasing numbers of master plan or managed communities.

The key feature of master planning a community is that you can decide what happens.

This is not only a feature, but one of the biggest benefits, especially if you get the plan right and you create a place where people want to live.

  • Las Vegas, USA started out life as a master plan community around 1903 with a land deal.
  • Irvine Ranch, USA is one of the best places to live in the USA and as a private community the owner has become the richest property developer in the US from this one property deal
  • Palms Islands, Dubai  is a very popular community that is made up of three purpose built islands each with housing and other real estate
  • Monaco Expansion, Monaco  With limited space and high demand, Monaco is building a new community by expanding into the sea.

While these examples of mostly privately funded communities are high profile, there are tens of thousands of smaller gated developments that are focused only around residential use.

Building planned communities can make economic, social and practical sense.

Blockchain Living

The existing blockchain technologies already provide the fundamental tools needed to create functional communities:

  • Money
  • Identity
  • Loans
  • Land title
  • Voting
  • Contracts

Building a blockchain community from scratch can use the best of existing technology, the exciting emerging technologies and enable smart cities technology to be factored from day one.

High speed wi-fi, autonomous vehicles, smart street lighting, automated logistics, sensor equipped places of work, safe places to walk and play and openness of communities to becoming technology labs for innovators eager to prove their new products and tools.

The primary consideration is not the availability or capability of the technology, but the longstanding issue: location, location, location.

That leaves the next logical set of questions – where to start and how many communities should be built during the first phase?

Blockchains In Construction Workshop DCW 2017

Distributed Ledger Technologies (DLT) or more commonly referred to as Blockchains, are being hailed as the next big industrial revolution. This technology has the potential to have a bigger impact on business and society than the internet has had, even when taking into account the huge technological advances we have seen over the last 20 years.

To evaluate the potential benefits of Blockchains to the built environment and infrastructure sector, an interactive workshop was created to run during Digital Construction Week 2017.

This workshop was designed to challenge how this new technology could support or accelerate the industry changes sought by the introduction of Building Information Modeling (BIM) and other transformative digital technologies aimed at increasing productivity within the construction sector.

The challenge areas for the Blockchain technology workshop covered:

Design teams – Create a network effect for accelerating BIM use; BIM Level 2 design development version control; securing design data and access to common data environments; and integration with COBie to create data standards for Blockchains.

Manufacturing – linking design data to manufacturing processes and to payments through automated smart contracts; tracking and authenticating the origins of all materials; life-time traceability of all materials and equipment; shipping and logistics; and B2B payments for goods and services based on smart contracts linked to programmes.

Construction – Reducing carbon footprint through just-in-time logistic management of materials and plant; improving openness and speed of supply chain payments; real-time audit trail of ownership for off-site materials; real-time validation of safety training and ability for specific people to work on sites; automated timecard processing; automated smart collateral warranties; and witnessed commissioning and handover processes moved to Blockchains.

Client – Cyber security; security of IoT devices; history of design development; controlled shared data feedback from IoT devices; defined BIM produced data access to third-parties such as emergency services; automated smart contracts, including warranties, collateral warranties, insurance contracts, proof of ownership; better integration with lifecycle management and maintenance tools; better oversite of payments throughout supply chains.

The industry experts and software  experts from IBM, SAP, Oracle Gold partner; in addition to professional standards bodies such as The Building Services Engineering Association and The Royal Institution of Chartered Surveyors, worked together to identify and then present processes that they would want Blockchains to disrupt.

The general view of the 40 experts from the construction and infrastructure sector and from several of world’s largest software vendors was that Blockchains do have the potential to accelerate the use of BIM, as well as streamline the unstructured and disparate supply chains within the construction sector.

Three areas in particular were highlighted as starting points for Blockchains within the sector:

  • Circular Economy. Traceability of materials from original digital design, through to manufacturing, installation and eventual recycling.

 

  • Smart Contracts. Breaking down big complex contracts into smaller automated rule based contracts that could attach payments, insurances and multi-party sign-off to actual provable supply chain events in real time.

 

  • Project Accounts. Making payments and cashflows more open to speed up payments to suppliers, sub-contractors and third parties.

Overall, the consensus from the workshop was that Blockchains do have the potential to bring to fruition that holy grail business transformation that the sector has been desperately seeking for the past 50 years.

In order to demonstrate the impact on existing processes and demonstrate the benefits that Blockchains can bring several pilots were deemed necessary.

Thanks to the financial technology sector, the Blockchain technology already exists to start these construction sector focused pilots.

As an action oriented workshop, the first pilot looking at creating a circular economy and logistics handling of steel is already underway.

The use of smart contracts within construction was by far the biggest topic discussed and work will shortly begin to bring together industry experts with contract experience and Blockchain experts to identify the full extent of the smart contract processes that could be adopted.

This is the first follow-up post following the workshop. As we gather and analyse the data from the workshop, we will provide more updates.

The introductory slides can be found here.

 

Notes to Editors:

This event was sponsored by the Process Innovation Forum (PIF), under their Co-Creation Programme.

The Blockchain workshop content and approach was arranged by the Helium Blockchain Alliance, with PIF support using their established Co-Creation Programme format.

The PIF Co-Creation Programme seeks to build a scalable framework where open innovation can take place and shared freely ultimately adding value to the built environment.

 

Blockchain Construction Contracts


Imagine an entire construction contract in the form of a blockchain smart contract where funds for each stage of construction are locked into the agreement in advance and released as work is performed or materials are delivered.

Fundamentally anything that could be included on a standard pen and paper construction contract could also be included in a blockchain constrained smart contract. In fact a handful of US states have passed or are in the process of passing legislation that makes smart contracts legally binding on and off the blockchain.

The benefits of this use of blockchain technology would be game changing.

Take a typical material supplier for example. That supplier will often require a deposit which the subcontractor must finance or request from the general contractor who in turn must also either finance or pass the bill along to the building owner. This deposit and the paperwork it generates can often be thousands of dollars and could cause major delays in construction as it is funded.

From a material supply standpoint specific payment terms can be dictated but the reality is that the supplier is unlikely to be paid until the subcontractor gets paid. Most subcontractors are subject to billing cycles of the general contractor, meaning that the materials may not be paid for until 60 days after completion of the work or more.

To make matters even worse the following phrase is all too common in the construction industry: “I’ll get you paid next week I’m just waiting on funding from another project”. The industry, especially at smaller and less professional scales, is riddled with “robbing Peter to pay Paul” scenarios which create cash flow problems detrimental to every entity involved on the construction project.

Now let’s theorize a similar situation utilizing immutable smart contracts on a blockchain.

At the signing of the “contract” the building owner, or more likely the bank, pre-deposits funds into a cluster of dozens of smaller sub-smart-contracts that are transparent and visible to anyone with the right credentials working on the project.

Due to the transparency inherent to blockchain technology the supplier in this situation will be able to see his or her funds sitting in the contract in advance. The smart contract will specify a list of criteria which must be met in order for the supplier to receive funds before material orders are placed. In this case, for example, the smart contract can specify that once goods arrive to the job site the funds will be released to the supplier through multi-sig style validation from a series of interested parties including the building owner (or representative), the bank, the subcontractor, the owner’s project manager, and the architect. Once everyone achieves consensus that the correct material has arrived at the job site and meets the required specifications the supplier could receive payment immediately. Furthermore, knowing the funds are accessible upon successful completion of the smart contract might compel a supplier to reduce or waive material deposits in the first place reducing delays and friction in the overall supply process.

By using blockchain based smart contracts the construction industry as a whole is transferring trust from the hands of contractors and subcontractors to the blockchain itself which will interpret smart contracts in black and white. Project owners immediately reduce their lien liability on a project since materials and subcontracts are inherently substantially paid on time when the work is done directly from the blockchain smart contract (eliminating intermediaries and greatly reducing the potential for misappropriation of funds). Grey areas that are extant in existing contractual relationships would be resolved in a similar way. For example, a change order could be a separate smart contract to address one specific situation that could not be resolved inside of the original contract.

The use of immutable smart contracts in construction would encourage general and subcontractors to submit more thorough bids from the onset. This extra due diligence prior to signing a construction smart contract could ultimately save the owner of the project a significant amount of money and heartache as there is a great potential to reduce the number of surprises that will be encountered along the way. Consider that even a 5% savings on a large scale construction project is substantial. We feel that migrating the typical pen and paper construction contract onto the blockchain could help building owners not only save money but possible get their project built faster and certainly more transparently than with traditional contractual agreements and distribution of funds.

Guest post

CotB Group Houston, TX

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Blockchains and Supply Chains discussion with SAP