Crypto constructs

Shamir Ghumra and Harriet Cooper examine distributed ledger technologies and their feasibility in the built environment

Technological advances in materials and computer sciences are fuelling innovation within the built environment, allowing us to design and create more efficient, intelligent and safer buildings. However, increasing globalisation and interconnectedness brings new challenges – from modern slavery, to counterfeit materials and certifications – so much effort must be focused on addressing these issues.

Among current innovations, ‘distributed ledger technologies’ (DLTs) are unique. Their principle use is as a means for creating more reliable, trusted and shared data sources, but the scope of their application and potential value is still being defined. Currently, many data-driven applications and sectors are based on a centralised system; a single point of information capture, storage and analysis. In contrast, DLTs use a network of connected ‘nodes’, distributed across various geographies, institutions and countries, with each holding the same record of transactions within a specific database or ledger. Any transaction of value, be that information or monetary, is verified by consensus and recorded chronologically using the transaction’s cryptographic number by every node within that DLT – in doing so, a trusted, transparent record of actions is created.

The concept alone is hugely disruptive. By removing, or at least limiting, the need for intermediaries and allowing a widely distributed real-time means of sharing information, the potential for innovation is amplified. Further to this, there is a particular type of DLT known as ‘blockchain’. Blockchains package together a number of unique transactions, identified by their unique cryptographic number, into a ‘block’. This is then chained to the previous block in the sequence using a cryptographic signature or ‘hash’. In this way, a blockchain can be used in exactly the same way as a distributed ledger, but it also allows for other elements to be included. For example, the creation of blocks acts as a ‘proof-of-work’. This prevents fraudulent addition to the blockchain, as it increases the necessary computational and electrical power required to alter a block (and any superseding it) and to hold more than the 51% of nodes that are required to do this. In removing the requirement for a ‘trusted’ third party (a single centralised control), blockchains are able to create a decentralised system that does not require trust. Instead, self-executing peer-to-peer transactions are carried out, which are recorded and verified by the whole system, therefore removing the need for one trusted body and it becoming ‘trustless’.

Proof-of-work is then rewarded with ‘tokens’, which can be anything from representing specific assets to a means of tracking things through the blockchain.

In addition, this form of DLT allows for rules to be determined for a transaction, as code can be added into the blockchain. Code can determine conditions for data to be added to the chain, creating a self-automated process.

In its basic form, blockchains and DLTs provide the means to create an auditable trail of transactions; however, the scope goes far beyond recording peer-to-peer trading. Being a ‘trustless’, unchangeable, decentralised record gives potential for the technology to address many societal, environmental and economic issues.

It was within this context that BRE sought to shed some light on the feasibility of such applications in the built environment.

Assessing application

University College London has recently initiated a Centre for Blockchain Technologies1, while other research-led foundations and governmental bodies such as Lloyd’s Register Foundation2 and the Government Office for Science3 have released reports outlining the potential impact of these technologies. However, it is still early days in terms of understanding the scope for this technology group.

As with any disruptive new innovation, there is a need to fully understand early on how it functions and how it could be used. BRE, funded by the BRE Trust and supported by Constructing Excellence, engaged with key stakeholders in the built environment to prepare a landscape review of the potential opportunities and risks associated with blockchain and DLTs.

Two workshops were facilitated through the Constructing Excellence network. The first focused on understanding how blockchain and DLT could be applied, the potential benefits and problems with application, and what specific sector areas these technologies would apply to; while the second investigated specific sector applications and wider issues related to blockchain and DLT application.

Common themes were evident throughout the workshops, with the necessary next steps being both clear yet potentially large in scope.

Blockchain

The Pros and Cons

Summary of findings

It is evident that DLTs and blockchains are a complex group of technologies that could potentially be applied to a wide selection of built environment sectors in a diverse manner. Each potential application comes with a further set of questions and implications that warrant further investigation.

Blockchain itself is a relatively new technology that is still evolving and growing; what may not work quite yet for a given application may become a possibility in the very near future.

There is potential to create disruptive applications that could reinvigorate the industry. However, with that comes a whole new world of governance, legal implications and regulation that must be developed alongside any application in order for it to succeed.

Key themes

Need

Do we really need blockchain if we are doing all of these things already – blockchain isn’t opening up new commercial areas, it is just bettering what we are already doing. We need to understand fully how exactly blockchain will improve each of these areas.

Cost

The cost of using blockchain would be high, especially at the beginning. A lot of data would require a lot of capital. For example, Ethereum is charging a lease for its open-source blockchain, and there is a cost for every transaction made (needed for validation and creation of the block). This cost could be from running your own private nodes or financial costs to facilitate the transactions.

Governance and legality

Governance is important, both for contributing to trust and to understand what legal implications there are for blockchain (particularly with smart contracts). We need to understand how there can be more assurance for countering human error in blockchain; trust and boundaries are key.

Holistic view

With all of the suggested applications, we must look at the bigger picture. In particular, we need to understand whether blockchain would help or hinder decarbonisation, energy usage, etc, and what cultural and societal issues blockchain would address/create.