Digital ledgers comprising unalterable, timestamped records could have huge ramifications for contract transactions, including those in FM. Martin Read and Ronan O'Boyle explain the game-changing potential of the technology behind the Bitcoin cryptocurrency.
3 July 2017 | Martin Read & Ronan O'Boyle
We are often too conditioned by existing frameworks to imagine just how far reaching the implications of new technologies might be.
Earlier this year, for example, Professor John Hinks spoke of his fears for facilities management being at risk from "disintermediation" - essentially, global tech giants cutting out huge swathes of 'middleman' activity by making possible direct connections between huge monolithic service provider brands and their minnow suppliers, threatening those in the middle providing FM service.
It's worth considering this kind of threat when evaluating the technology that powers Bitcoin and other cryptocurrencies. Because when you understand the principles behind blockchains, you may well then be able to imagine a 'post-document' world in which every 'transaction' becomes an opportunity to share myriad pieces of valuable information.
The basic idea behind blockchain technology is not overly complex (see ‘What is Blockchain?’). Essentially, the key factors are that commercial transactions can be entered into an unalterable and digitally verified ledger, the purity of which has significant ramifications not just for the way transactions are conducted, but how organisations relate to each other. Information previously locked away in documents can be incorporated, making contractual transactions accessible and transparent to all parties at the very point of transaction.
Ledgers have forever been at the heart of commerce, most prolifically in the recording of money and property. So it's not too much of a leap to imagine blockchain, as a new distributed ledger system, playing a key role in transactional activity across the full spectrum of property and property service delivery environments.
There has already been much speculation about how blockchain could contribute to a more efficient and less labour-intensive property industry. In whichever role it is put to work, the sequential and time-dependent nature of blockchain can assist in creating 'next-to-live' information feeds that help build an ever-increasing archive of information on all aspects of the built environment.
One good comparison is with building information models (BIM). Each BIM contains data about an individual component, its transaction history and make-up. Data on a wall, for example, would show the construction materials involved, perhaps the phase of construction that it was delivered in and the specific building regulations it meets, etc. So why should any property or service transaction be any different? Each transaction can contain any information that the system demands of it. And just like a BIM that many users can collaborate on, conflicts are raised on a blockchain ledger if all users on the network cannot verify the data.
Blockchain technology is also seen as a secure environment in which to run so-called 'smart contracts' - databases that use and record transactions to execute the specific terms of a contract, including those in complex, multi-party agreements. Connect sensors to such transactions in order to report specific activities against a contract's specified service level agreement and there could be profound consequences.
FM procurement consultant John Bowen likes the look of blockchain for a number of applications. "For FM, it offers the potential for logging events and subsequent actions in a way that allows a number of involved parties to add to the event record and for all, as well as any other interested people, to see progress in real time," says Bowen. "It can also be used for contracts or project management - but like all tools, it will not work effectively if it isn't used properly.
Bowen thinks another advantage may well be that blockchain-powered smart contracts will provide a "fairly low-cost solution, working across a variety of access platforms - desktop, laptop, handheld etc".
Another consultant, Chris Weston, agrees that from an FM perspective the potential lies in the way blockchain contracts could be "modified to talk about contractual requirements being met and automatically paid".
Blockchain technology could prove particularly important to FM from a device security perspective. Blockchain transactions can be used to authenticate device identity, protect and supply data, handle access to facilities, and process transactions in the operations of facilities - all in a distributed way.
IoT devices, explains Dr Hans Lombardo of open protocol developers Chain of Things, can send data to private blockchains for inclusion in shared transactions, all with tamper-resistant records. Customers and business partners alike could both access and supply IoT data without the need for central control and management. Furthermore, the blockchain could be used to release payment for services or use of facilities once agreed conditions are met and tracked.
Lombardo cites Zerado, a UK-based blockchain applications startup which is developing a solution for the management of shared offices in buildings, particularly incubator, accelerator or co-working (IAC) space facilities.
The Zerado solution provides "integrated, reliable, frictionless, and secure registration" for accessing facilities. Building managers are provided with a database of visitors, their behaviour and subsequent management information.
The importance of blockchain in this respect is in its ability to confirm device security, rather than payment or customer data security - and this security is naturally critical to the development of the Blockchain concept. At ThinkFM, Graeme Wright of Fujitsu spoke about the rate at which the cost of sensor technology is falling. Right now the Chain of Things consortium is developing connected sensor modules that can report their status directly into the blockchain, allowing for functionality such as a trigger that allows payments up and down a supply chain. Imagine this in FM, with each transaction confirming a specific element of compliance or the meeting of a specific SLA requirement.
Plenty of logistics still need working out, with the technology in its conceptual infancy. But the impact of wide-scale blockchain implementation could have profound consequences for existing industry 'middlemen'. Also, the need for blockchains to access always-on digital archives for verification purposes poses other significant considerations. For example, one estimate is that the energy to run blockchains globally could - when use is mature globally - be equivalent to the energy required to run Denmark.
Then there are regulatory issues. Who sets the standards to ensure that systems roll out effectively? What are those standards? And how do they differ from industry to industry? These are national / supranational concerns.
Blockchain offers the possibility of instantaneous, entirely trustworthy interactions, with all that suggests for FM contracts. But it will need swift and adequate buy-in from governing authorities if these benefits are to take off. But there exist profound implications for FM contracts, and those party to them, in a blockchain-enabled world.
Notes: What is blockchain?
Blockchain is a technology invented in 2008 to create the peer-to-peer digital currency Bitcoin. It is an open, distributed database that maintains a continuously growing, permanent list (or ledger) of ordered records. All users benefit from a secure and reliable record of data and transactions.
These records, called 'blocks', are generally transactions between two parties. Each 'block' (or entry in the ledger) contains a timestamp and a link to a previous block (hence 'chain'). Crucially, the data cannot be altered retroactively.
Each transaction, hence timestamp, is created by the approval of a distributed peer-to-peer network of computers/servers. This creates an encrypted consensus that allows for autonomous management.
Transactions are thus recorded efficiently in a verifiable and permanent way for all on the network to see. Transactions are simultaneously anonymous and secure in a carefully maintained and tamper-proof 'public ledger of value'. And critically, the need for a 'middleman'/central authority/third-party is removed.
The ledger can also be programmed to trigger transactions automatically, so for example: 'On payment of gross sum, pay VAT to HMRC'.
Blockchain hold tremendous potential for a wide variety of industries. A blockchain transaction can be used to record of any exchange or interaction, with current uses including identity management, voting, file storage, and energy management. Potential uses include assuring the supply chain of goods.
Proponents of blockchain describe it as "the second generation of the internet - an internet of value, rather than of information alone". It's also being described as "distributed operating system (OS)" for data.
This feature has been adapted from an original article by Ronan O'Boyle, director at Urban Intelligence.