Transforming Construction Projects with Smart Contracts
Understanding how Smart Contracts can be a better way to deliver construction projects
Chapter 1: Making a good construction contract
In the realm of construction projects, a solid foundation lies in a robust construction contract. Contracts not only facilitate the completion of work, material delivery, and payment transfers but also serve as a catalyst for collaboration among stakeholders and a measure of key performance indicators. With the advent of advanced technology, smart contracts have emerged as a game-changer for construction projects. By harnessing the power of blockchain, these traceable, immutable, and secure contracts create a more collaborative and transparent working environment, reducing commercial disputes and fostering alignment between project stakeholders and contractors.
Chapter 1: What is a Smart Contract in Construction?
A smart contract is a computer program that translates the terms and conditions of a contract into executable code on a network. It operates based on predefined rules, automatically executing actions when specific conditions are met. This self-executing capability enables a wide range of applications across various industries. See the figure below for a comprehensive overview of smart contract use cases.
Implementation & Exexution
Transforming a construction agreement into a smart contract between involved parties:
- A smart contract is a computer program that translates the terms and conditions of a construction agreement into a code, typically written in Solidity, and operates on a blockchain network.
- Smart contracts are approved and verified through consensus voting within the blockchain network, and are stored on each participating node.
- Smart contracts facilitate consensus-driven validation, standardization, and storage across all network nodes.
Smart contracts operate on the principle of “if/then” statements:
- They monitor specific situations, execute predefined terms, and allocate transactions accordingly.
- The computer program autonomously sends these transactions through a blockchain network for validation, following established rules.
- The validation process can be either manual or automated, depending on the configuration.
Transcribe amendments and change orders into an enhanced SmartContract between parties:
1) The contract amendment, encompassing new or modified contractual terms and logic, is efficiently communicated to all relevant AECindustry parties.
2) The enhanced smart contract is unanimously agreed upon and validated through a ConsensusVote on a Blockchain network, ensuring secure storage across all network nodes.
Smart Contract Advantages
- Cost Reduction: Smart contracts eliminate the need for intermediaries, reducing project costs and enhancing efficiency.
- Enhanced Transparency: Smart contracts provide maximum transparency, ensuring clear visibility into project costs, timeframes, and scope.
- Simplified Decision-Making: By minimizing complexity, smart contracts enable informed decision-making, leading to more efficient project management.
- Streamlined Dispute Resolution: Smart contracts efficiently resolve contractual ambiguities, preventing delays and enabling smoother project execution.