Blockchain and capital projects: real-world applications

What is blockchain?

Blockchain is complex under the hood, but the basics are straightforward. It is technology that allows records—of transactions or other kinds of information—to be stored, validated, and updated simultaneously in many different computers, which may belong to many different organizations. So it’s like a database or ledger that’s distributed over many different computers.

It is called blockchain because it first encrypts records into files called blocks, then copies these blocks to a peer-to-peer network of computers. Each subsequent block “seals off” those below it, making them into an immutable chain.

How the encryption works, how the network’s members agree to validate transactions, and who can join the network are some of the factors that separate one blockchain from another.

When well-applied, blockchain offers simultaneously distributed, trusted information, without requiring a central authority (such as a bank or government agency) to validate it.

For those who want a further introduction to how blockchain works, I recommend this brief video by my colleague Haskell, which draws on his childhood experiences in South Carolina’s government registry offices, as well as PwC blockchain thought leadership.

Blockchain for capital projects

In PwC’s CP&I team, we help capital projects become more efficient, lower cost, faster to complete, higher quality, and easier to forecast. Digital technology is one of our main tools, and blockchain is playing a growing role.

Here are some of the ways in which we’re either already using blockchain to help CP&I clients, or developing pilot programs for the very near future:

• Contract approval: blockchain enables owners, engineers, contractors, subcontractors, and suppliers to simultaneously validate and approve contracts. That eliminates the need to transmit and manually authenticate many documents.
• Invoicing: blockchain can input and validate data from multiple contracts and invoices to automate authentication. That increases speed and accuracy while keeping down costs. 
• Payment processing: whether through cryptocurrencies or through private (member-only) networks, project owners and contractors can use blockchain to process  payments quickly, accurately, and at a lower cost around the globe.
• Supply chain oversight: CP&I firms and their suppliers can use blockchain to validate specifications, payment terms, and payments made and received. When blockchain is connected to smart sensors and other IoT technologies, it can also track shipments.
• Materials traceability: to further support supply chain oversight, blockchain combined with smart sensors can keep track of materials (and their related documents) from the initial source to final delivery. That can reduce the risk of fraud, theft, or damage.
• Inventory management: integrated with IoT sensors, drones, augmented reality, and other essential eight technologies, blockchain can keep track in real time of inventory on site, in warehouses, and in vendors’ warehouses.

Blockchain risks

For all these applications, a good blockchain can offer speed, accuracy, and an immutable audit trail. That enables better forecasts, lower costs, and greater stakeholder trust.

Yet the nuts-and-bolts of blockchain technology are complex, and it needs impeccably reliable protocols for authenticating transactions and sharing data. After all, blockchain’s speed and accuracy come in part from automating much of what people currently do manually.

You have to make sure that you’re automating accurate and trustworthy processes, and that you have the right governance and oversight. You also need to make sure you’re prepared to meet the regulatory and compliance issues that blockchain raises.

How to Proceed

The answer to these challenges lies in combining blockchain expertise with CP&I experience and with processes built for accuracy and trust.

Enterprises that can put these elements together may find blockchain to be a powerful and reliable tool. And blockchain is a technology where it’s possible to dip your foot in the water, with a pilot project.

Blockchain may or may not prove to be  “the new internet.” But with its potential to help both individual capital projects and the organization reduce costs and risk, it is very much worth a close look for CP&I  firms today.