Leapfrog technologies such as blockchain and cryptocurrencies are destined to radically change how buildings are designed, constructed and managed. This will have a major impact not only on building operations, but also business performance.
A blockchain is a decentralised database that chronologically and securely records transactions.
Given its data is resistant to modification, blockchains in business are being explored in a variety of industries due to their high security performance.
Cryptocurrency is a digital currency where encryption techniques are used to regulate the generation of units and verify the transfer of funds, operating independently of a central bank. Bitcoin is one example of cryptocurrency. Cryptocurrency short-circuits the need for time-consuming administration logs of maintenance contracts and tasks.
Blockchain has the ability to create value in the built environment through smart self-executing contracts between owners and operators, system components, system integrators, and construction management, including material tracking and payment. Cryptocurrencies provide a secure and trackable way to trade across borders, industries and suppliers in the supply chain.
In the future, machines in buildings will be designed and integrated into the building rather than built and attached as an afterthought. This could involve items such as transportation or energy utility infrastructure – for example, creating a sustainable micro-grid on a campus that allows renewable energy to be generated, optimised, transferred and stored.
Blockchain could be utilised for commercial arrangements between all partners in a building, helping to evenly and automatically distribute payment for different channel usage. These networks will change our design considerations and selections as we create buildings of the future.
There is a growing trend for homes and offices to be printed from scratch in warehouses, with parts clipped together like LEGO, similar to car factories and IKEA warehouses. This will require an increase in the accuracy and robustness of the design data documentation. This enables blockchain to then connect the supply chain – from planning processes, construction contracts, landlords – through the high-quality design documentation.
Building owners can also use the design documentation to inform decisions such as planning energy and water infrastructure required for the estate, which has the potential to decrease both capital costs and ongoing operational expenditure, substantially impacting overall business performance.
When there are disputes in the construction industry, common areas for disagreements include differences of opinion over plans and specifications/scope of work, contractors interpreting planning documents differently, project access and construction defects. Blockchain technology could provide a trustworthy contract administrator by introducing an error-free process to build and monitor contracts, in the following ways:
Also known as self-executing contracts, these are universal agreements that authorise and can help protect legal or financial transactions. Smart contracts are converted to computer code, then stored and replicated on the blockchain database. Smart contracts define the rules and penalties around an agreement in the same way that a traditional contract does.
The benefits they could realise for the construction industry are enormous. For example, smart contracts work on the if/then principle for administering and paying suppliers.
If the plumber repairs the pipes, then he requests inspection. If the person responsible for inspecting the work agrees it’s acceptable quality, then the plumber gets paid.
Smart contracts are used for each of these if/then scenarios and are securely recorded on the blockchain.
Smart contracts also provide more trust in the transaction of complex plant equipment.
For example, for a mechanical plant: A client could purchase direct from the supplier, pay a portion of the cost when it’s verified the plant has left port in the origin country, transfer liability to the shipping company, and release further payment when the plant arrives on site, again transferring liability, this time to the contractor responsible for installation.
Then final payment can be issued once the plant has been installed and commissioned.
Blockchains securely record transactions ranging from cryptocurrency like bitcoin to the transfer of other values such as a service, product or an approval in the form of a smart contract. Blockchain records are linked using cryptography, which prevents third parties from reading private messages.
A DAO is an organisation run through rules encoded as computer programmes, using smart contracts. Imagine one day if a building – through the IoT and metering and monitors – is setup as a DAO at the beginning of a project, through to construction and beyond to the in-use phase.
For example, blockchain and a building maintenance system could lead to a building’s DAO ordering a new light fitting, accepting delivery, requesting a supplier for installation, followed by payment.
Payment could come from the DAO’s bank account connected to tenants of the building. The DAO bank account could autonomously manage rent payments, body corporate fees, insurance payments and maintenance requests.
Blockchains are able to provide a securely backed-up digital identification, allowing people to share relevant information that is validated by the authorising body. Identities of people and/or vendors could be securely recorded in the blockchain, additionally used to build reputation for work. This ID allows for contractors and businesses who don’t know or trust each other to do business.
The south-eastern state of Andhra Pradesh in India is one example of a region leveraging blockchain in groundbreaking fashion to benefit the built environment. It has become the first state in India to adopt blockchain for governance and is piloting the technology through a number of projects, including management of land records.
The value of blockchain for India is significant. Property-related disputes account for an overwhelming two-thirds of all Indian civil legal cases. Property ownership and acquisition frequently stall even the most well-resourced projects, often leading to violence and death, with large-scale corruption and inefficiency in India’s land markets attributed to reducing the country’s GDP by 1.3 per cent every year.
Andhra Pradesh decided to use the impenetrable nature of blockchain to protect the state’s assets, property and transactions, by preventing interference from outsiders or fraudulent government officials.
And just how is this being done?
Andhra Pradesh has partnered with Indian blockchain start-up Zebi Data to secure and record more than 100,000 land records, and is working with Swedish blockchain start-up ChromaWay to agree land registry solutions.
Andhra Pradesh has also partnered with Covalent Fund to create an India-focused blockchain stack named Velugu Core, that makes government data (including land records) freely and digitally available, which developers can use to build apps. Individuals or companies wishing to buy a particular property can access this data through an app built using the blockchain stack to access public information on the property’s previous ownership and transaction details, thereby reducing disputes of ownership.
Similarly, blockchain is being used to build Andhra Pradesh’s capital city Amaravati. More than 24,000 farmers from 22 villages are selling their land to the government to create the city, and the entire documentation process for the massive sales exercise is based on blockchain. The decentralised distributed ledger system is creating foolproof digitised land registries of the residential and commercial plots allotted to farmers. Records are generated and sent automatically to the registration office, captured in a multitude of local languages, ensuring full security without any duplicate registrations. Data is logged with the Capital Region Development Authority (CRDA) and can be traced back at any given point of time so security of title is always maintained.
CRDA sent officials to villages to educate sceptical farmers about the system, who have been pleasantly surprised to learn firsthand how simple and straightforward the fully automated process is, ranging from allocating plots to registration and storing the data.
While these projects are still in their infancy, the possibilities and benefits they are anticipated to bring to Andhra Pradesh’s economy are endless – and just the beginning. In the future, linking blockchain in a building’s design, operation and IoT will truly unlock the value of what Andhra Pradesh has started.
Andhra Pradesh’s commitment to blockchain is part of the country’s national push to lead in tech transformation and blockchain adoption. Unlike other countries, in India, governments are promoting innovation rather than the private sector, incentivising startups to collaborate directly with government and leverage public resources. Other states are following Andhra Pradesh’s lead with four more states recently announcing support for blockchain in similar use cases as part of a bid to bring more transparency to governance.
Andhra Pradesh plans to eventually implement blockchain across the entire administration.
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