AEC Magazine's BUILDCash/BUILD1x mention in the article: "What does blockchain really mean for construction?"
What does blockchain really mean for construction?
Written by Randall Newton
When the popular business advisers and father-andson team Don and Alex Tapscott turned their attention to blockchain technology in 2016, it set off a firestorm in the business world. “The blockchain is an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value,” they wrote in “Blockchain Revolution.” The praise was up and down the corporate ranks. No longer was the hype just about Bitcoin, but something more useful. The reaction from Microsoft CEO Satya Nadella was typical: “This book has had an enormous impact on the evolution of blockchain in the world.”
Fast forward to late 2018. Where are all the blockchain solutions for business? More specifically, where are the blockchains for AEC? To answer, let’s back up a bit. Because hype seems to travel faster than reality, let’s start with definitions.
“Blockchain is a distributed database where many copies of the data are replicated and synchronised,” says Casey Mullen, vice president of technology strategy at Bentley Systems, one of many companies in BIM software examining the use of blockchain tech. “It solves the problem of trust — or lack thereof — among two or more parties.” Data is replicated and synchronised, but not copied, a key distinction. Blockchain offers a new type of Internet, where digital information exists in a state of consensus — not a state of “copied” — among two or more parties.
In financial technology (fintech) circles, blockchain is often called “distributed ledger technology” because the ledger of transactions is distributed among all nodes of a vast peer-to-peer network, generally thousands of computers. The network uses cryptographic techniques to verify transactions, reward nodes on the network with a tradable token (where cryptocurrency comes from) and prevent corruption of the ledger. The blockchain ledger establishes its trust because every copy of the ledger must always be in agreement with all others. Once written to the ledger, a transaction cannot be unwritten. Terms such as “trustless,” “immutable,” and “decentralised” also describe blockchain technology.
The first blockchain came with Bitcoin, the digital currency invented by the anonymous programmer(s) known as Satoshi Nakamoto. In Bitcoin the blockchain is a transaction record created by the constant solving of cryptographic puzzles that generate coin. Notes, records, and agreements can be appended to coin transactions. For Bitcoin and other cryptocurrencies, those transactions are generally buying and selling of the currency. But it doesn’t have to be. Newer blockchains including Ethereum, Hyperledger, IOTA, and EOS offer various forms of “smart contracts” which enable parties to record and monitor transactions. There are ways to minimise or eliminate the use of cryptocurrency tokens for such transactions, depending on the blockchain used.
“The basis for blockchain security is encryption,” says Scott Sheppard, a long-time researcher and tech evangelist with Autodesk Labs who now works in the office of Autodesk’s chief technology officer. The encryption uses key pairs, one public and one private. The public key is a randomly- generated string of numbers representing a user’s address on the blockchain. The private key is like a user’s password that gives the user access to their assets in the blockchain. As part of ensuring that assets on the blockchain are incorruptible, users must safeguard their private keys much in the same way they protect their passwords. All instances of cryptocurrency theft happened not because somebody hacked the blockchain, but because they stole private keys or hacked apps that work with blockchain data.
Fragility of trust in AEC
“Trust in the design and construction industry is a very fragile thing,” notes Malachy Mathews, a senior lecturer in architecture at the Dublin Institute of Technology. The industry is “not set up to deal with trusting relationships, even though we need them.” While doing doctoral research, Mathews took a close look at how new technologies could improve collaborative processes between contractors and their supply chain partners. “The process of procurement seems to be set against trust,” Mathews says.
Two years ago Mathews started looking at other disciplines for ideas and technologies. “A convergence of language” led Mathews to examine blockchain. “I see big database companies like Oracle and Google taking an interest in design and construction,” Mathews says. “It is a trillion- dollar industry ripe for disruption.” Mathews believes blockchain technology can be the catalyst, despite the distraction of Bitcoin as a very public financial phenomenon. “It colours the public view of what blockchain is; we need to divorce blockchain from currency. Blockchain will have more impact in the world than Bitcoin will ever have.”
BIM and blockchain
“BIM is very data-centric, and the best way to establish trust is to trust the data itself, which is not the case today,” says Arnaud Gueguen, co-founder of Bimchain.io. The French startup is working on a web-based application to track communications and commitments between project participants in the complete design and build ecosystem. The app will connect directly to Autodesk Revit. Gueguen is seeking beta testers willing to use Bimchain on a real project.
To Bimchain, trust means “everything on the signed paper, not the 3D model,” says Gueguen. “All the legal signed stuff. That was our entry point into the solution, trying to connect the contractual paper base with the operational digital data.” Bimchain’s goal is to make the model the unique source of truth. “Today BIM data is not contractual; there are many sources of truth: BIM, PDM, DWG, paper,” says Gueguen. “We believe using Revit as the single source of truth will make the model far better.”
Bimchain’s first step is a Proof of Contribution module, where contributions, agreements, and validations are certified on the blockchain and made part of the Revit BIM model. “It is a ‘proof of handshake’ to prove the BIM Manager, the architect, [and others] agreed on the model,” says Gueguen. “We believe this will be able to replace the scattered papers-and-signatures process with an indisputable system.” Bimchain is using the Ethereum blockchain, the second-largest cryptocurrency by market capitalisation and the first to introduce specific smart contract tools to the blockchain ecosystem.
One step at a time
“The typical AEC project involves tens if not hundreds of parties,” notes Autodesk’s Sheppard. “Unfortunately, the interaction of so many parties can lead to confusion. Sometimes this confusion is significant enough to lead to litigation. Blockchain is a technology that can help reduce confusion and resulting litigation.” Sheppard is quick to point out that, while Autodesk employees are taking a close look at blockchain, the company is not commenting on any specific development initiatives that may or may not exist within the company. Such a cautious attitude is typical of established players in any industry. When the major players in AEC, like Autodesk, Bentley, or Trimble move into a new technology space, they generally do it by acquisition.
Moving slowly into such potentially disruptive technology is about more than software developers wanting to get it right. The current methods — as inefficient as they are — are deeply entrenched. “Everyone trusts the old system with its inherent faults, and may even be deeply vested in mitigating those faults,” says Mathews. “The same or greater level of trust must be demonstrated and maintained in any new system in order to be adopted and lead to commercial success.” The use of blockchain in AEC “is quite a fundamental thing,” says Abel Maciel, a director at Design Computation, Ltd., a London consultancy. Maciel is also a founding director at the Construction Blockchain Consortium (CBC) and a faculty member associate at the University College London in both architecture and blockchain technologies. “There is so much improvisation in construction now. Things arrive on the job site wrong, broken, or not as ordered.” Maciel gives the example of cast pipes and folded ducts. They have very different performance purposes, are used for different things, but they look identical and sometimes come from the same factory and can be mislabelled. If the duct is used in a high-pressure application, it could explode.
“How do we avoid such a problem?” asks Maciel. “Blockchain could de-risk the process.” A tightly controlled manufacturing environment could be certified and posted to the blockchain. The result could be “de-risking the construction process and creating a better designed asset. The tendering process would be accurate, with real costs.” By using Ethereum smart contract technology, “we can move away from the idea of ‘every two weeks of signing is good enough.’ We can build a smart contract to trigger payments based on validation.”
Maciel and Robert Aish, known to many as the father of generative design technology, are working through the CBC to launch three open source projects related to BIM and blockchain. One for distributed financing, one for smart procurement, and one “most ambitious” project related to the use of blockchain, machine learning, and BIM for design processes.
Blockchain for AEC is neither pie-in-the sky or pie-on-my-plate at this moment. But the day is close when AEC firms can try out applications and see how they might improve workflows. Based on how long it took BIM to hit the 50% tipping point in design firms, blockchain adoption has a long road ahead.
“It is all a bit theoretical and hypothetical at the moment,” notes Mathews, “but I think there is merit in it.” Mathews believes, that like most AEC technologies, it will be clients that drive adoption not practitioners. “How did the handshake develop? It was simple. I have a chicken, you have the beans. We hold hands to make the exchange.” Blockchain as the new transactional handshake will require AEC firms holding the deliveries and clients holding the money to be willing to “shake” on the trustless, immutable, decentralised record found on their blockchain. “There can still be independent operators from project to project but they will have trust among the group. They won’t be tied to legacy necessities. Interesting things could happen.”
But is blockchain the answer? “We must always ask, ‘is blockchain better than the current solution?’” says Mathews. The three crucial elements of blockchain — a record of value transactions, the formation of consensus, and the coin or token — are all needed. In blockchain the coin or token is the incentive, but the incentive does not have to be money. Mathews thinks reputation can be tokenised in AEC. “Reputation is a currency. Look at Uber, Airbnb and others offering comments on services,” says Mathews. “Why wouldn’t we have a facility to comment on people we have worked with? This changes the dynamic of the working relationship.” Mathews foresees a system whereby coin is awarded to suppliers by clients “like merit badges not currency.” Contractors could win new work based on certified reputations written onto a blockchain.
“Construction has been notorious for not only inefficiencies and ineffectiveness but also for traditionally importing innovations from other sectors and adopting them in an ad-hoc manner,” notes Eleni Papadonikolaki, a researcher at UCL Bartlett School. She foresees blockchain being just one of several new technologies gaining adoption. ‘The Internet of Things, Artificial Intelligence, and BIM all promise to provide simplification, transparency, and an accountability chain not only to the transactions across the construction supply chain but also for the interactions between physical and digital systems.”
The construction industry in US and UK are “notorious for being largely adversarial.” The hierarchical nature of contracting relationships is also an issue, Papadonikolaki notes, especially at a time when network relations are proving to be more efficient. Blockchain could help eliminate the doubt and mistrust. “The supply chain map is a mess. It is a ‘blame the customer, don’t trust, don’t share’ environment.”
Randall S. Newton is USA Contributing Editor for AEC Magazine, and managing director of Consilia Vektor, a business advisory service working at the nexus of blockchain and design-based industries.
Not waiting for the academics
Not everyone who thinks blockchain for AEC is a great idea are working through the theory or creating consortiums; entrepreneurs are hard at work. The following list should not be considered as an endorsement; due diligence is always prudent when considering new technology. Most of these companies are actively seeking investment funding as well as working on their products.
Buildcash (USA) says its new cryptocurrency product “is freely tradable digital money, developed to revolutionise the construction industry through real-time, peer-to-peer payments of goods and services.” (buildcash.com)
Bopti (France) is a cryptocurrency from the makers of Batopti construction management platform. The French company claims “a leading European insurance company” is supporting the initiative. (bopti.io)
CustomCoin (Switzerland) is a project to streamline the formation of capital for construction. (ccnowpro.com)
Builderium (Switzerland) is building a reverse engine bidding system to connect clients to contractors. (builderium.io)
BitRent (UK) is building a cryptocurrency platform to help users “land reliable investment deals” for construction. (bitrent.uk)
Etch (UK) is focusing on construction as one of the primary users of its blockchain-based payroll platform. It is working with the global accounting firm KPMG and the Construction Blockchain Consortium mentioned previously. (etch.work)