Saturday, May 30, 2020
November 13, 2019

How blockchain and IoT are opening new capabilities in the construction industry



IoT is enabling the digitalization of assets and processes in the construction industry at a fast pace. Construction projects are generally complex and involve a lot of regulations and standards. There are issues with trust and verification that compliant work has been carried out, and there’s also no standard method for communication between parties. As a result, the industry now has increasing amounts of fragmented repositories of data in addition to a growing list of intermediaries. Companies should leverage the combination of blockchain and IoT to increase transparency in cost, time and scope of projects.

Blockchain Basics

In simple terms, a blockchain is a database architecture technology implemented as a decentralized, distributed and public digital ledger that’s used to record transactions across many decentralized computers. A record cannot be altered retroactively without the alteration of all subsequent blocks and the consensus of the network. This allows the participants to verify and audit transactions inexpensively and create trust and transparency, and it eliminates paper and duplicate effort.

There are different approaches to implement blockchain technologies. While they might have the same general functions, different blockchain platforms have different security and technology risks, and organizations need to evaluate the various solutions across their lifecycle to make sure it fits their particular needs and risk appetite.

Public blockchain: access is wide-open; anyone can become a node and participate in the blockchain.

Hybrid blockchain: a form of hybrid system that provides for situations where whitelisted access is required but all the transactions should be publicly viewable. Examples of this are government applications where only certain people should be able to write to the network but all transactions can be publicly verified.

Private blockchain: access is limited to specific users through a permissions-based private network. Anyone outside of the private blockchain cannot see or participate in blockchain transactions. 

An Overview of Blockchain in Construction

The construction process involves a lot of professionals who need to exchange information to design, implement and operate projects successfully. There are a lot of intermediaries who are used to authenticate the whole process like regulators, bankers, insurers, lawyers, etc. There’s a need for building trust amongst all the stakeholders. The transition of operations from traditional methods to digital forms paves the way for a digital tool like blockchain that can foster and enable trust amongst players.

For those who want open, trustworthy IoT communications without having to rely on intermediaries, a private blockchain could provide the solution and enable data security between IoT devices. The power of blockchain is that it creates very powerful standards in a simple-to-adopt way that doesn’t interfere with existing processes. 

Blockchain is a peer-to-peer implementation where trust is managed systematically to provide a level of transparency that enhances productivity and simplicity. For contractors who deal with many different subcontractors, owners and suppliers, all of whom use disparate systems, blockchain allows contractors to streamline and manage all the data in one immutable ledger. The idea that players need to come together and solve problems through everyone logging into the same database is a welcome development, especially considering that the construction industry boasts of some of the highest litigation costs of any industry. Implementing blockchain ensures that all data, regardless of the system or source, become verified and trusted. The leading objective of blockchain is to break down data silos to leverage information in real-time. Blockchain is a shot in the arm for the industry because it isn’t one central authority but a shared and open platform to secure members who then drive trust, transparency and integrity. 

Blockchain is opening new IoT capabilities as it allows a seamless exchange of value and digital assets amongst players without requiring an intermediary to do so. Value might be a service, a product or approval in the form of a Smart Contract. The combination of blockchain and IoT seeks to improve outcomes in the construction industry. Blockchain creates a trustworthy chain of events, transactions, assets and critical project details. This allows emails, project management systems and accounting systems to come together in one place, creating a verified record of all transactions on the blockchain and ensuring that data cannot be lost. It means there’s one shared version of the truth for every project, and that’s what the industry needs to eliminate duplication, reduce errors and ensure data integrity. 

Imagine the challenge faced when closing out a large construction project; it’s a nightmare to collect data from all the subcontractors and input it into a report. Typically, project data is scattered, difficult to source and hard to verify. This is compounded by the lack of project collaboration and the silos that develop from the use of different technological solutions. The major problem with a siloed approach is that it produces data that’s often inaccurate or wrong. Data retained in isolated systems is usually fragmented and rarely shared between organizations, so it loses its value and verifiability. 

Without blockchain technology, a receiving organization must independently invest in establishing the trust of any data it receives before using it to make business decisions. Blockchain, however, allows partners to share real-time data, the history of that data and any modifications to it. The blockchain aims to improve on data integrity by collecting data directly from the source through IoT devices and other digital systems and being able to come to a consensus on which version of it is the truth. Having access to trustworthy data creates exciting downstream possibilities for businesses. 

Blockchain will not replace software applications; it will just allow them to work closer together. It can be the standard that organizes in the background to facilitate the operational process. Trusting the data source is also a concern, and, after all the work is done, the data just end up gathering dust somewhere. With blockchain, handover can be done actively and in real-time. This makes the blockchain the place where you can create truly living operations and maintenance manuals. 

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