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What is Blockchain and its impact on the construction industry?

Last Updated on July 21, 2021 by Admin

Blockchain is the buzzword you may have heard of in 2021. If not, you must have heard of Bitcoin and cryptocurrencies. Blockchain is the technology that these digital payment platforms are built on. Blockchain technology is revolutionizing the digital payment and fin-tech industry. It also has the potential to revolutionize the construction industry. Below we have compiled ideas and diverse perspectives on blockchain for construction that could be revolutionary for the construction industry.

What is blockchain, and how blockchain construction startups are gaining momentum to make it a reality for the construction industry beyond 2020? There might be a chance that there would be a solution for the construction companies to implement this technology.

Blockchain in construction is the latest technology to be discussed in the construction world. It could be helpful for blockchain use in the construction supply chain and various blockchain applications in the construction domain. Kindly read this article to know about blockchain BIM construction and also the potential of blockchain technology for construction management and blockchain civil engineering.

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Most construction professionals have no idea what blockchain is, in addition to the general public. The construction and the world will continue to change.

Now is the time to educate yourself about this groundbreaking emerging technology for construction industry blockchain and learn how it can be applied to construction’s future. Doing so can benefit your company in some considerable ways and the potentials of blockchain technology for construction management. Let’s explore below.

What Is Blockchain?

Blockchain is a system that tracks transactions across a peer-to-peer network. In some situations, these transactions are made via either cryptocurrency or bitcoin. Blockchains act as a distributed digital ledger among this peer-to-peer network. Whether they are financial transactions or contracts, various kinds of agreements can be recorded and confirmed once complete.

Blockchain technology enables distributed, encrypted and secure logging of digital transactions. It is the underlying technology of Bitcoin and other cryptocurrencies.

Blockchain technology claimed to have the potential to disrupt many aspects of how companies do business. And like other emerging technologies, blockchain has potential opportunities in the construction industry.

How does blockchain work?

Blockchain is an advanced technology that can simplify and secure transactions among parties. It is a shared, immutable ledger that facilitates recording transactions and tracking assets in a business network.

An asset can be tangible (a house, a car, cash, land) or intangible (intellectual property, patents, copyrights, branding). Virtually anything of value can be tracked and traded on a “block” with its most significant benefits removing the need for a middle-man to “secure” the transaction, hence promising to remove/or reduce the cost of brokers, bankers, lawyers, retailers significantly.

This is because “the system” acts as security, as it is decentralized and not stored in any single location. Participants in the network called “miners” confirm the transactions or “blocks.” So there is no need for a trusted third-party intermediary. Blockchain can thus have powerful applications in all those transactions where we currently need an intermediary, such as payments, supply chains, voting, and much more.

According to the Harvard Business Review, “Blockchain is the first native digital medium for value, just as the internet was the first native digital medium for information.”

Blockchain technological removing intermediaries in the construction lifecycle aims to simplify the landscape and reducing costs, increase efficiency, reducing time to value.

But how do we identify the need for one? How do we put this into practice? How can this new technology be of any use for the construction sector?

Now you might be thinking, but how does blockchain technology apply to the construction industry? Aside from benefits in the change of money, adopting such technology could also assist with a more streamlined exchange of another thing crucial to the success of a construction project: information.

Since a blockchain system is designed to track updates of digital records continuously, it is very much a technology that could revolutionize the way that project teams build in the future. Blockchain in construction has the potential to be a game-changer.

Blockchain is built on four main concepts:

  1. It is a distributed ledger, so every network user has simultaneous access to a view and verifies the information stored.
  2. Cryptographic functions ensure the integrity and security of the information.
  3. Participants confirm changes directly with one another. This replaces the need for a third party to authorize transactions.
  4. It can run additional business logic “known as smart contracts” that allows the agreement on and automatic enforcement of the expected behavior of a transaction or asset embedded in the blockchain.

Blockchain is expected to revolutionize computing in several areas, mainly where centralization was unnatural and privacy was paramount.

Why is blockchain important for the construction industry?

The construction industry has regularly been cited as one of the world’s most fragmented, high-impact sectors. The best examples of this phenomenon are all those capital infrastructure projects across the globe that have a highly fragmented, scattered, and complex supply chain.

For example, the Crossrail project in London, with more than 700 various suppliers just from the UK, or the Burj Khalifa, with over 12,000 workers from more than 100 countries on-site at the peak of its construction.

To manage such an extended supply chain, keep track of work in progress, schedule, cost, and payments. Enormous effort and resources are needed. On top of these challenges, construction projects experience different forms of mistakes, delays, and accidents at various stages and degrees.

Bitcoin and cryptocurrency mastery bundle blockchain in construction

The lack of accountability in the construction industry has been an ongoing issue for decades. With significantly squeezed profit margins, firms are poised to find ways to cut corners and deflect blame from the resulting failures.

These are precisely the main “pain points” and areas where blockchain can help make the process more efficient, transparent, and accountable for all participants involved in the project. There are potential blockchain applications that have already been introduced and had an influence on the economy.

Some of them can be directly applied to the construction industry, and some of them can serve as a basis for a more tailored application for capital construction projects. The three main elements with regards to the potential applications:

Benefits of Blockchain in Construction

So far, there have only been a few real-world use cases of blockchain in construction. So in what ways can blockchain be a positive force of change in the construction industry? Here’s a look at some of the revolutionary uses for blockchain in construction.

Smart contracts 

Intelligent contracts are primarily hailed as the future of the construction industry. According to the University of West England, automated contracts that reduce the necessity of intermediaries can save time and money are poised to mark on the industry. Blockchain is one way that these contracts can be updated and transactions recorded. Smart contracts that identify accountabilities and trigger milestone-based payments could automate agreements.

It would likely involve creating some centralized tracking system, where the parties involved define the rules, regulations, penalties, etc., around the project they’re working on together.

The system would then work to enforce these rules and regulations as the project progresses automatically. For example, if the material were not shipped on time, the blockchain system would record that, and appropriate retaliatory action—per the pre-agreed upon rules and regulations — could be imposed if this is a penalty fee, the transaction could occur automatically via bitcoin or cryptocurrency.

Fundamentally, implementing such a system wouldn’t just improve efficiency and resolve disputes before they even have a chance to occur. Still, they could also work to hold the parties involved more accountable.

Blockchain technology allows the creation of ‘smart contracts. These are self-executing digital contracts that automatically transfer currency or an asset once the underlying code establishes that a predetermined condition has been met.

Smart contracts can be used to automate payments, track intellectual property rights, and transfer ownership of materials and equipment. They can also reduce ‘paper-shuffling between intermediaries. An amount between two parties in one location might automatically cause an order to be sent to a supplier in a different area to produce and deliver materials relating to another aspect of the project.


You’ve undoubtedly heard and are already implementing various building information modeling(BIM) technologies on your project sites be. It could be a dangerously effective combination when BIM and blockchain variety. When combined, BIM and blockchain can work to enhance the effectiveness of intelligent contracts greatly.

For example, in BIM, the model itself can be used as part of the contract between the parties involved in the job. Therefore, all the parties would be working to match the actual physical construction on the project to the BIM model in the contract. Any deviation from the model may result in re-work or change orders.

Incorporating BIM into intelligent contracts could also only award payment when the project is built according to the digital plan, again mining BIM and blockchain, holding all parties on a project accountable, and creating a higher level of transparency. The combination could improve the effectiveness of BIM technology.

Currently, BIM uses peer-to-peer networks for information sharing, but blockchain could make updates in real-time. This constant feedback and monitoring would help with transparency, lead to better overall communication, and ultimately result in a higher quality of artistry on a project.

A combination of BIM and Blockchain will allow high volumes of data to be collected from different design packages, presented to stakeholders in a dashboard format, and securely shared between them. Project progress can be monitored and updated, and work hours (whether person-hours or machine hours) registered and compared.

BIM will allow an audit trail of a design review and approvals process, identifying IP ownership, any clashes between approved design and construction quality, proposed modifications, and their impact on design and construction.

Blockchain in Construction for Payments

The blockchain concept is built around the monetary exchange, albeit bitcoin and/or cryptocurrency. Meaning, blockchain can be utilized to streamline payment processing.

Getting timely payments to all stakeholders on a project tends to be a significant challenge for many companies. Failure to pay on time can lead to conflict, and when a dispute arises, there’s the potential for a project to go south as a result.

One of the construction industry’s challenges is to ensure that timely payments are made to stakeholders. Regulatory frameworks and requirements such as the security of payment structure, defects bonds, retention trust, and project bank accounts are attempts to bolster protection for payments made downstream to subcontractors and workers.

Blockchain technology will improve the accountability and integrity of the payment process by enabling secure, traceable payments. It will allow government bodies responsible for monitoring this and enforcing sanctions against violators to be alerted to incorrect information and contraventions of regulations. So how can blockchain improve the payment process? Simple: By increasing security and creating traceable information.

Supply Chain Management

If your supply chain is not in sync, then your project is going to suffer. There’s likely to be a bevy of delays, which will lead to lapses in productivity, cost overruns, and an unhappy owner.

How exactly does blockchain play into supply chain management? In the same way, it can be integrated into many of the other aspects mentioned above of construction. Specifically, blockchain can help trace physical items from origin to final destination. It can help improve transparency, which can help all parties stay on the same page and avoid potential pitfalls and oversights.

Similarly, blockchain can help contractors use unique digital-specific identifications to verify vendors and suppliers and thereby grow their reputation over time based on how well their work is performed. These digital IDs can work two-fold, as they can also help your company verify the credentials of any subcontractors before they’re ultimately hired.

Blockchain-enabled applications that aggregate data into a shared project management dashboard could help to manage workflow.

A distributed ledger that keeps an end-to-end chronicle of the construction process could record all building inputs and assets, including warranties and maintenance checkpoints.

Blockchain-enabled apps that track materials, testing, and results against building codes and standards could streamline inspections.

Blockchain technology can be applied to all stages of supply chain management – from design to materials procurement, incorporation, and construction.

Imagine secured data identifying the origin of materials, their compliance with specifications and quality checks, and incorporating delivery/packing notes from the place of manufacture. And tracking the materials through shipping, customs, and delivery to a site, then site inventory and incorporation of the materials into the structure – along with the location of those materials.

This level of accountability for products and services will deliver a high level of transparency to stakeholders. It will encourage the correct behavior and trust – as the saying goes, ‘you can run, but you can’t hide. An efficient supply chain ecosystem will reduce redundancy, as less inventory will be required to deal with contingencies.

Work health and safety management systems

Site events (such as safety incidents, failures of materials, site conditions, and weather conditions) are currently logged manually or via sensors and IoT tools. Blockchain technology can provide a secure source of WHS and site information with greater accountability.

Effective carbon tracking

Using blockchain technology, many distributed data collections can feed into a common platform. Tracking both embedded carbon (making buildings) and operational carbon (using and maintaining them) is an increasing challenge for construction – blockchain could help solve this problem as the industry adopts greater accountability for its environmental impact.

Challenges to Implement Blockchain in Construction 

Will blockchain be one of those technologies that are implemented seemingly overnight by construction companies? Most likely, no. There’s a long way to go with this, as the digital revolution in construction is only just beginning.

There’s a long road ahead before blockchain becomes the norm in construction. Here’s a look at why blockchain in construction still has some obstacles to overcome:

  • Skepticism: Even the most tech-savvy contractors might be hesitant to adopt blockchain into their day-to-day operations.
  • Lack of resources: To implement blockchain into everyday operations, there’s a variety of complex systems that will likely need to be created. This comes at a cost, both for the plans and to hire the people necessary to develop and implement them.
  • Market readiness: Or lack thereof when it comes to blockchain. Is the market ready for blockchain in construction? Not right now. It needs time to mature to a point where it’s more of a reality and less of a pipe dream.

Top Recommended Courses To Learn BlockChain Technology

1. Professional Certificate in Blockchain Fundamentals

2. Professional Certificate in Blockchain for Business

3. Bitcoin and Cryptocurrencies Offered by Berkeley University of California 

4. Fintech: Blockchain for Business and Finance By University of TEXAS


As you can see, blockchain has some great potential to be a highly positive force of change in the construction industry. And while the industry may not be ready yet for a full-court blockchain press, know that adoption of such is closer to reality than it is far away.

Looking towards the future, blockchain is just going to be something that you’ll be hearing a lot more of—and it’s only a matter of time before it’s a necessity in any construction business and blockchain in construction project management.

Blockchain in the construction industry provides solutions to many current problems in construction information management. However, it is more likely that it will be built into generic IT infrastructure on top of which construction applications are built, rather than used directly by authors of construction-related software. It can make construction processes less centralized which opens the need for research in that direction.


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