The construction industry is always under pressure to be more efficient (ie producing more, with less waste and as quickly as safely possible). For instance, in the UK, 75% of capital projects go over budget, and 20% of cost overruns are caused by poor project administration and management.
Smart contracts have the potential to help construction companies operate more efficiently: our latest ebook “Blockchain and regulations - a digital transformation in the construction industry”, explores these advantages.
A smart contract is a self-executing, coded contract with pre-defined terms. It facilitates the execution of a contract through automation and without interference. Lots of research is going into how to create smart contracts, how to make smart contracts safe, maintainable or updateable.
OK, so where do smart contracts exist? Where are they executed? And how do they work?
Smart contracts are verified, executed and enforced by a non biased computer program that runs on a blockchain network. The program starts running once the smart contract's terms have been accepted by all parties. As the contract is verified and enforced by the blockchain network, a third party is no longer needed.
The fact is that smart contracts can be executed by code rather than people, removing the possibility of human error and automating tasks that would traditionally require human interaction.
One of the best aspects of the blockchain is that there is no need to pay middlemen (intermediaries) and that it saves time and dispute because it is a decentralised system that exists between all permitted participants.
Blockchains unquestionably operate faster, cheaper, and more securely than conventional systems, this explains why more smart contracts are being used to conduct transactions on various blockchain networks, such as Ethereum, Solana, Tezos, Hyperledger, etc.
Use Cases of Smart Contracts
Contractors in the UK have talked about "the golden thread" for a while now, but what exactly is it? The Golden Thread is the idea of having an exhaustive audit trail that spans the whole lifecycle of a construction project, from sourcing materials to project completion and maintenance.
Essentially the golden thread is both:
It will be the duty of the people responsible for a building to put in place and maintain a golden thread of information. Having a golden thread will mean that those people responsible will have easily accessible, reliable, up to date and accurate information. Without this information, it is very difficult to manage and maintain buildings safely.
Blockchain technology can provide a solution that not only brings together all of the relevant information but can ensure regulatory compliance.
If you wanted to rent out your flat, you would have to pay a middleman like Craigslist or a newspaper or site to advertise, and you would also have to pay someone to verify that the tenant paid rent and followed through.
You can reduce costs by using a decentralised solution. You simply encode your contract on a smart contract. Smart contracts are revolutionary in terms of transforming the current real estate practices, replacing traditional contracts as the sole agreement between seller and buyer. It automatically executes the requirements as soon as specific conditions of the contract are met.
All parties including the bank, the agent, and the mortgage lender can sign an agreement via smart contracts and transactions are kept on a blockchain.
Personal health records can now be encoded and stored on a blockchain platform with a private key which would grant access only to specific individuals.
Patients’ records could be securely stored on a blockchain system and automatically sent to insurance providers - so they have a record of what treatments have been administered and paid for. Smart contracts, too, could be used for general healthcare management, such as supervising drugs, regulation compliance, testing results, and managing healthcare supplies - speaking of which, you can download and read further on how this process is improved through blockchain in Finboot’s ebook on ‘Blockchain technology in the pharmaceutical industry: Fostering Transparency and Traceability’
Non-Fungible Tokens (NFTs)
NFTs have gained enormous market traction in recent years. Data from DappRadar, a firm that tracks sales, showed that trading in NFTs reached $22bn in 2021, compared with just $100m in 2020, and that the floor market cap of the top 100 NFTs ever issued – a measure of their collective value – was $16.7bn as they turned out to be the most successful use-case of smart contracts. To learn more on the explosion of these, check our most recent blog post on NFTs.
NFTs are created through a minting process that requires the use of smart contracts set up on the blockchain.
A smart contract is a tool that allows implementing a sale agreement between the NFT owner and the buyer. The smart contract contains information on the NFT, such as the work’s creator, other parties who are entitled to royalties each time the NFT is sold, and the work’s ownership history. Smart contracts frequently include a link to the work they represent, which can be viewed by only the owner.
Finboot’s expertise on Smart Contracts
Although smart contracts are native to blockchain itself, at Finboot we have abstracted the deployment, configuration and access to them through our Low-code platform and ecosystem MARCO. We’ve taken this complex blockchain feature and have turned it into something that business users can understand and use without becoming a blockchain expert. Some of customers like Iberia and the London Chamber of Arbitration and Mediation are already seamlessly using smart contracts on some of their daily ops.
Our solution BLOCKSTAMP enables the configuration of business logic into smart contracts, allowing the automatization of processes and dramatically reducing the back-office workload. With our implementations, we automatically reconcile invoices between different stakeholders, minimising disputes and reducing time to settlement, better cash flows for all the involved stakeholders.