Blockchain for AEC & FM

While Blockchain has immediate impact in economies where value can be virtual, we in the design, construction and building operation industry have a different set of problems.

"We work in a world where our virtual value requires to be turned into a physical value."

How do we go about doing that ?

I believe the industry needs to re evaluate "Value" and Blockchain can provide part of the solution for this.

Please note that some of this information on Smart Contracts on the Blockchain is original work by Flores FV (2016) and can be found at

http://blog.grantthornton.es/2016/08/31/bim-blockchain-smartconstruction/ and is sole authorship and intellectual property of Grant Thornton Spain – Grant Thornton S.L.P.

also Smart Contracts for Construction is Ref from: Robles DR (2015) with minor amendments Mathews (2016) Extracted from http://www.naic.org/cipr_newsletter_archive/vol19_blockchain.pdf

Smart Contracts on the Blockchain

Smart Contracts for Construction (SCfC)

A “smart contract” is a decision executed by a computer

algorithm on a Blockchain. For example, if condition A and

condition B are triggered, then payment C is executed.

What potential does this have for us in the design, construction and building operation industry ?

Answer: LOTS

An adjudicated smart contract is a smart contract whose execution

is contingent on a physical observation or judgment by a reliable witness. This can be also verified and validated by the construction of "as built" digital modeling with model checking against digitally signature and locked down pre-construction building models. Mathews (2016)

A planning model on a planning blockchain

A tender model on a project blockchain

A construction model on a contractors blockchain

An as-built model on the owners blockchain

An smart contract for construction (SCfC) is an adjudicated contract with the added requirement the adjudicator is deemed the most appropriate person to be performing the adjudication. These additional requirements mean a method is required to establish

the most appropriate adjudicator, and the method must likewise be insurable.

The (SCfC) administrator must make decisions in physical space—not just digital data. The (SCfC) administrator must be able to be present or by use of technology have a "timestamped" presence in time and space, determine causation of an event and deal with any ambiguity in relation to the facts being observed.

A significant function on a Blockchain is a Smart Contract.

In the context of blockchains and cryptocurrencies, smart contracts are:

    • pre-written logic (computer code),

    • stored and replicated on a distributed storage platform (eg a blockchain),

    • executed/run by a network of computers (usually the same ones running the blockchain),

    • and can result in ledger updates (cryptocurrency payments, etc).

A smart contract is some code which automates the “if this happens then do that” part of traditional contracts. Computer code behaves in expected ways and doesn’t have the linguistic nuances of human languages.

Code is better, as there are less potential points of contention. The code is replicated on many computers: distributed/decentralised on a blockchain and run by those computers, who come to an agreement on the results of the code execution.

https://bitsonblocks.net/2016/02/01/a-gentle-introduction-to-smart-contracts/

An example smart contract on Ethereum.

Ethereum is a decentralized platform for applications that run exactly as programmed without any chance of fraud, censorship or third-party interference

Source: https://www.ethereum.org/token

Companies such as Ethereum promise to make smart contracts on public ledger block chains as easy to build as dragging and dropping puzzle pieces into a web page.

The validity of the (SCfC) is what establishes tangibility and invokes law— therefore, money and property.

Securing the pool of decentralized (SCfC) administrators would be essential to insurability of such contracts on a blockchain. Digital Transformation will always see existing roles submerge and new roles emerge. We have examples of this in Ireland where statutory legislation requires design and construction to be "certified". The requirement is seeing a growth of "specialist certifiers" for the design and construction industry.

The obvious question to be asked here is "are Blockchains insurable?"

The insurance industry is faced with both a dilemma and an

opportunity to build specialized insurance for blockchains. Dan Robles paper addresses this. Ref: Robles DR (2015)

http://www.naic.org/cipr_newsletter_archive/vol19_blockchain.pdf

"Smart Construction" sole authorship and intellectual property of Grant Thornton Spain – Grant Thornton S.L.P.

Ref: first used in an article by Flores FV (2016) , Grant Thornton, Extracted (Oct 2016) from

http://blog.grantthornton.es/2016/08/31/bim-blockchain-smartconstruction/

The use of Smart Contracts is the most promising field because it exploits the main advantage of BIM: transparency of information between the parties. If this information, is on a Blockchain and is distributed among all parties so that the principle of neutrality is guaranteed, we could build on it a genuine contractual ecosystem linked to information shared through the BIM model.

Blockchain is, in this case, is a real source of confidence when setting out contracts, given its security, trace-ability and openess.

There is a special type of contract these are called Oracle Contracts. For example, a client would retain a contractor to build a building. They would deposit funds into an escrow account managed by “smart contract” in a block chain. This means that the computer will flip the switches instead of an accountant, banker, or attorney.

At certain points in contract and “oracle” – a third party vetting mechanism – will verify that the conditions or performance of the agreement have been met, then they would flip a switch that releases the funds to the contractor or back to the client (or through a predetermined decision tree), depending on objective observation and or confirmation through evidence based technologies.

This is efficient for the contractor because they don’t have to worry about getting paid as long as they meet the conditions of the contract. The client does not need to worry about getting ripped off because they are assured that the conditions of their agreement will be met. The system is efficient because high integrity is rewarded and there is little incentive to cheat which minimizes lawyers, accountants, social dysfunction in a public ledger that provides extraordinary analytics available for societal learning in the public domain.

Ref: Robles DR (2015) with minor amendments Mathews (2016)

Extracted from http://www.naic.org/cipr_newsletter_archive/vol19_blockchain.pdf

Here we have the core concept.

The linking of BIM by making use of its database (and the ability to create parameters to program the BIM database) to the Blockchain with its security and traceability to initiate smart contracts validating a virtual value confirmation into the physical value.