An Opportunity to Initiate - (2nd in a Series)

An Opportunity to Initiate (2nd in a Series)

Getting into the details regarding the advancement of blockchain technology in the construction industry

In previous articles, we've written about the high-level concepts that marry construction's current struggles and blockchain technology's opportunity to address them.  In this article we continue to dig into the details of just how the implementation could take place.  Specifically, we are going to take a look at how one of construction's most influential and yet vulnerable institutions, The American Institute of Architects, can step up to the proverbial plate.  Doing so could be a very large step for the use of blockchain technology in the construction industry. 

To begin, there’s a critical functioning of blockchain technology that needs to be understood.  Specifically, we need to discuss the technical mechanism that maintains the functioning of a blockchain. “Node” is a term that refers to the physical computers operated by individuals, that perform this function.   In the case of Bitcoin, Nodes do the work of solving math problems called "cryptographic proofs".  By doing so, they leverage the encryption element of the technology for multiple purposes. 

One purpose of the encryption is obviously the security element of the technology.  Blockchain is touted as an “immutable” method of storing informational property, such as a ledger.  

While the details of the cryptographic protocol used to assemble the Bitcoin ledger in a distributed fashion are significantly technical, one can think of blockchain as a sophisticated cryptographic tool applied toward establishing ownership rights of a digital bearer asset (such as cash or coupon). 
What makes this tool unique in the history of digital finance is that this ledger is both completely devoid of a central governing authority and secure from hacking and tampering in a mathematically absolute sense.

The immutability of this ledger is derived from the fact that is it computationally infeasible to reverse or alter data which is signed and verified with a cryptographic proof. While there are various proposed methods for committing a cryptographic proof (Proof of Work, Proof of Stake, etc) what they all share in common is the reliance on the deeply established principles of cryptography and distributed systems to secure the data being committed to the blockchain, in a way that is both immutable and publically auditable. The full technical scheme of the first blockchain protocol can be found in Nakamoto's 2008 paper: "Bitcoin: A Peer-to-Peer Electronic Cash System".

A bitcoin is an “award” given to the first computer that cryptographically proves their investment, while the other Nodes then begin the work of verifying that the computer that first solved the problem is, in fact, correct.  Cryptocurrencies like Bitcoin transitioned from a computer-driven way for two parties to whisper to each other into the speculative freight train it is today when someone decided one day to give one of these Nodes money (or something tangible and of value) in exchange for a bitcoin.  This could, at first, seem strange.  Why would they do such a thing?  What value did it have?

Whoever paid real money for a bitcoin wanted to increase the incentive the Node to continue to invest the personal time and electrical energy necessary to maintain the system. The Bitcoin network allows people to operate with quasi-anonymity, both as users of the network transacting between each other, as well as Node operators (also called "miners").  That quality of the Bitcoin blockchain was something that the people using the system found to be very valuable, valuable enough for financial compensation.  Without this injection of real cash, it’s likely that this technology would never have become more than a white paper in sparse practice.

Understanding this component will be essential to explaining how the AIA can bring its financial, technical, and political mass into the inevitable interaction between construction and blockchain technology.  The final technical element necessary to describe the possible application is that each blockchain requires its own Nodes, whereas general use blockchains like Ethereum offer the ability for contractual partners to utilize their existing infrastructure of encryption and Nodes.

This distinction is necessary because AIA could act as either a neutral, financial supporter for the Nodes that would maintain the construction industry’s blockchain, or the governing body regarding how the construction industry will operate via a Smart Contract centered process such as those maintained by Ethereum.

We will continue this discussion with part 2.

 - Michael Farley
Cycle Rate Performance