Blockchain: the future of construction payments and contracts

  • Technologies

Blockchain technology is a decentralized database that stores a record of assets and transactions between two parties.

This database works as a public record of what, who and how it is done. This transaction history is stored in blocks of data to be grouped and protected by cryptography. In this way, an immutable and unforgeable record of all the transactions of a network is created, copied in each of the devices used by the network.

Do you know the implications of Blockchain in the construction industry? There are numerous possibilities: increase transparency, improve efficiency and optimize the management of the supply chain.

Blockchain in the construction industry - infographic

Blockchain in project & jobsite management

In the life cycle of a construction, the collaboration and communication of all the actors between the different phases is an important challenge for the success in the management and planning of a project, allowing to save time and costs. For this reason, the elimination of intermediaries is one of the improvements of blockchain to the construction sector.

In this case the figure of a notary is transformed, and it is done in a digital way, speeding up the processing times and allowing agreements and contracts to be closed without intermediaries. A system of total traceability of the works is proposed, which allows to know in detail the construction process, the origin and distribution of the materials, and even the construction techniques.

In summary, in project & jobsite management, blockchain provides the information in a simple, transparent and economical way.

For more information, visit the MIT Technology Review article on Blockchain in construction.

Blockchain in investment and financing

CEMEX Ventures focuses on finding solutions to scale new financial sources, optimizing loan and credit management and fostering new standards of transparency in the construction ecosystem. Late payments and financing have been persistent problems in this industry. According to Euler Hermes’ Quarterly Report on Past Due Payments, the average payment time for construction companies and SMEs (small and medium-sized enterprises) was 82 days. Sometimes, they could even rise up to 120 days.

CEMEX Ventures seeks to promote various solutions, such as open source contract standards NEC, JCT or FIDIC to implement best practices. These contracts allow the management of contractor payments, establish payment commitments and reduce payment times to 28 days.

Read more details of smart contracts applied to the construction industry at Lexology.

Blockchain in the supply chain

With Blockchain transparency is promoted by establishing the register of transactions recorded in a block and in several copies of the ledger, in turn they are distributed in different nodes or devices. In this phase of construction, blockchain can increase the productivity of the supply chain, from the improvement in storage management to delivery, optimizing the chain of command.

We identify that blockchain provides solutions to two major challenges in the supply chain: reliability and integrity in the processes. It offers consent between the different parties involved, since everyone has access to the assets within the blocks and without being able to eliminate the movement history.

You want to know more? In Forbes you will find examples of Blockchain applied to the construction industry.

In conclusion, there are no limits for blockchain in the construction industry. Although many of the applications are incipient ideas or are in the process of prototype, they allow to value CEMEX Ventures solutions with blockchain to improve the challenges of the construction industry.