Enterprise Blockchain
Did you know that the construction industry is actually one of the most inefficient industry in the United States? Everyone we know has either built or remodeled a house, or know someone who has. It can be extremely frustrating. McKinsey & Company, a highly recognized consulting firm, conducted a study just last year.
They found that while other manufacturing industries have increased their productivity over 20% during the last 20 years. The construction industry’s productivity during that same period had actually decreased 3%, 3%, over that same time period.
In a world where technology has had a significant impact, this is truly unbelievable. So, what can we do as an industry?
Blockchain
Fortunately, a new technology has emerged that will radically address our industry’s inefficiencies.
And that new technology is “enterprise blockchain”.
But what is “enterprise blockchain”? The blockchain is a set of protocols that provide the ability to transfer value, or money over the internet. And does so with a new level of governance that could not exist prior to blockchain technology.
I will share four specific features of blockchain technology that can address our industry’s inefficiencies. Those features are:
Tokenization
Smart Contracts
Distributed Ledger Technology
Triple Entry Accounting
Tokenization
The first feature blockchain supports is asset tokenization.
Yes, asset tokenization uses the same blockchain technology as Bitcoin. However, we are addressing the underlining technology of Bitcoin, and not Bitcoin itself.
So, let’s set aside any assumptions we may have regarding Bitcoin, and let’s explore what asset tokenization brings to the table.
Using additional internet protocols, we can create digital tokens that facilitate the distribution of funds used during the actual construction process. We are converting those construction funds into digital assets, or tokens, to rapidly accelerate payments, and to allow payments at a much more granular level.
In our case, we allow payments to be made as small as the individual construction task itself. And because digital tokens are considered “smart money”, we can assign properties or parameters to the token that control its specific use.
For example, if a project identifier is assigned to the token, then that token can only be used for that project, and nothing else. And when the vendor identifier is assigned to the token, only that vendor can use those tokens as payment, and no one else.
When the time comes, payment for a particular construction task is approved by the project manager, we can immediately convert that digital payment into US Dollars, and make a direct deposit into the vendor’s checking account.
Smart Contracts
Second, we are also using another amazing blockchain feature called “smart contracts”.
Smart contracts are the same as the traditional contracts we use every day. But smart contracts are executed as programmable computer code. And unlike humans, these smart contracts are executed consistently, each and every time, 24/7.
In our case, we issue construction purchase orders, as smart contracts. Then, once those purchase orders are released, the smart, in smart contract takes over and carries out that purchase order’s terms and conditions, automatically.
Likewise, when payment is received by the vendor, another smart contract automatically creates the vendor’s “lien waiver” and distributes it to the appropriate parties. And it does so, without fail.
Distributed Ledger Technology (DLT)
Distributed Ledger Technology (DLT) represents a groundbreaking innovation in data management, offering a secure, transparent, and decentralized framework for record-keeping. As illustrated, DLT embodies several critical properties. It is **programmable**, allowing the use of smart contracts to automate processes; **distributed**, ensuring that every network participant has a synchronized copy of the ledger for complete transparency; and **secure**, with all records individually encrypted to prevent unauthorized access. Additionally, DLT is **immutable**, meaning validated records cannot be altered, ensuring trust and reliability. The technology also supports **anonymity**, preserving the privacy of participants through pseudonymous or anonymous identities, and ensures **unanimous consensus**, requiring all participants to validate the records. Finally, every transaction is **time-stamped**, providing an accurate historical record. These features make DLT an indispensable tool for industries seeking efficiency, trust, and resilience in their operations.
Learn MoreTriple Entry Accounting
“Distributed ledger technology”, is unique in its ability to facilitate a new form of accounting.
We have all heard of “double entry” accounting.
But “triple entry” accounting has now been recognized as the first true innovation to the accounting profession in over 500 years. Bringing this technology to the construction industry allows for an immutable, single source of the truth by creating a common ledger between two or more parties.
With triple entry accounting, burdensome reconciliation and almost all transaction disputes will disappear from the construction process.