A whole new kind of building blocks

There has been considerable debate about how blockchain technologies could revolutionise the financial services industry, but it could also have a significant impact on UK construction.

What is blockchain?

Blockchain is best known as the technology behind bitcoin. However, the technology is capable of numerous other uses than simply facilitating digital currencies. In simple terms, a blockchain is a continuously growing list of records (known as “blocks”) that are secured together using strong cryptography. Each individual “block” contains a link to a previous block, a timestamp and other transaction-related data.

Blockchains are, by design, extremely secure and highly resistant to any modification of the data they contain. The key thing is that they are managed by peer-to-peer networks, and any attempt to retrospectively alter data in any one block requires changes to be made to all the subsequently generated blocks – something that would require collusion of the majority of the network – and is thus almost impossible to achieve. As such, blockchain technology can be used to create open, distributed ledgers recording transactions between parties in a highly efficient, auditable and permanent way.

Blockchain technology can therefore help enable trust in environments where it might otherwise be lacking. This explains why blockchain technology is sometimes used in highly controversial circumstances (such as payment for drugs or weapons on the “dark” web).

But that use should not put us off the more positive roles such technology could play in other areas, including in the construction sector.

How might blockchain technology be used in the construction sector?

It is not hard to see potential uses for an undisputed record of actions and facts, captured in real time, not capable of revisionist/subjective reinterpretation.

UK construction is a highly regulated and data generating environment, with numerous compliance verification steps to be recorded across multiple data paths. Payment records, regulatory certifications, delay and disruption events, and programme critical path impacts immediately spring to mind. In that context, it is hard to imagine a future for our sector which does not involve embracing blockchain technology and processes once they are adapted to the data needs of our sector.

The potential for tie-in with BIM technologies is also clear. Blockchain could be used to verify who added which components to a model, when, and at what level of authority and sign-off.

Beyond recording value exchange, and certifying proof of existence of different types of data, other commentators have written of the potential for blockchain technology to enable the administration of “smart contracts” and the creation of decentralised autonomous organisations (DAOs) – created by combining smart contracts. A smart contract is simply a computer protocol intended to facilitate, verify and enforce performance of a contract. In short, it is about contract law and related business practices being facilitated through the design of electronic commerce protocols.

The logical extension to this type of contracting is a DAO. For example, imagine a large new commercial office building, brimming with sensors collecting data on its occupancy and use. The building is occupied by many tenants. Could a DAO, representing those occupying the building, autonomously manage much of what is currently thought of as the building’s facilities management – and potentially much more beyond, to include collection of rent, service charges, insurance contributions?

Who is looking into all this in the UK construction context?

As ever, the question is “what and when?” for the take up of blockchain technology in the UK construction sector. There are a number of initiatives in this area, with a couple of the key ones being:

• BuiltEnvironment (.be) has been formed by a group of construction professionals previously brought together as the CIC BIM2050 Group, as a network that promotes digital adoption across the built environment (see www.teaser.dotbuilte.org).
• University College London, which has established a Construction Blockchain Consortium (see www.constructionblockchain.org), whose stated aim is to become “the leading construction industries knowledge transfer consortium” and a “vehicle for tracking and testing these emerging technologies and build proof-of-concept systems.”

Conclusion

Blockchain technology therefore has the potential to contribute seriously to how we restructure design, procurement, occupation and management of the built environment. The verifiable decentralised and permissionless manner in which data is captured ought to support the adoption and operation of a circular economy. As we progress to an “internet of things”, we will find ourselves increasingly needing a “ledger of things” – and it is hard to imagine that role not being played by blockchain technology at some point in that future.

This article was written by David Savage. For more information please contact David Savage via  david.savage@crsblaw.com or +44 (0)1483 252 614.

This article was first published in Building.