One of the hottest emerging technologies is blockchain. It’s the underlying technology that makes Bitcoin work, but the potential applications are far larger than cryptocurrency.
Blockchain is a distributed ledger. Instead of a single database or organization holding transaction records (or other data), the records are available to millions of computers anonymously. Through massive distribution of these records, a nearly tamperproof data record is created. (Harvard Business Review recently published a good overview of the technology.)
Currently, the primary applications for blockchain are in the financial industry, where it has the clearest value proposition.
Don Tapscott, author of Blockchain Revolution, delivered a TED talk and summarized why transactions backed by large financial institutions are problematic. First, the holders of the data are centralized and can be hacked. Second, these institutions are not accessible to everyone. Third, transactions are slow, taking hours or days for money to change hands. Additionally, the institutions charge a fee and take personal data (which may be detrimental to vendors and customers in the future).
Within energy, blockchain is a strong candidate to support the distributed electrical grid. Rocky Mountain Institute has written about how blockchain will impact the energy sector and how it will be a key to cyberdefense on the grid. Greentech Media also hosted a podcast on blockchain exploring the possibilities for applications.
In short, blockchain can record and facilitate transactions between many entities that buy and sell energy. As more homeowners and businesses become electricity suppliers by installing solar and investing in batteries, there will be a much more complicated and interconnected web of energy buyers and sellers. Many individuals and businesses will be buyers and sellers, in some cases simultaneously, depending on the time of the day. Blockchain is a foundational technology that can make this complex marketplace work efficiency, securely, and without significant overhead costs.
There are a number of firms talking about blockchain applications in real estate, but it’s typically on the brokerage side. For example, blockchain could eliminate the need for title insurance, reducing the costs of purchasing a home.
Increasing marketplace efficiency is advantageous in facility management, too. The use of blockchain in building operations has received less attention, but there are many opportunities that the technology enables.
Given that blockchain is a secure way to automate transactions and the transfer of data, here are a few leading ideas about how blockchain may change the way buildings are operated.
Facility management services
Many organizations hire outside vendors to manage their offices. These contracts can include managing capital projects, operating the subsystems like HVAC, and running the cafeteria. The middleman approach works well, because most large offices require dozens of different services.
Managing the facility services and the business may be too much for most corporations. A corporation can realize significant efficiencies by paying a single trusted entity for facility management services. Additionally, the corporation may not have the resources to properly vet all the necessary vendor relationships. The efficiencies of scale are compelling, and may outweigh the contract fees paid to the facility management company.
Blockchain may obviate the need for such a middleman. One concept within blockchain is the “smart contract.” Also known as a “self-executing” contract, it is a set of instructions, conditions and outcomes that are built into the blockchain. The smart contract defines how money should change hands and automatically executes the transfer as conditions are met. This replaces the legal contract or other paper agreement.
Explained one way, “If blockchains give us distributed trustworthy storage, then smart contracts give us distributed trustworthy calculations.“
Here is a simple example in shipping and delivery: Instead of signing a paper agreement with a delivery service, a smart contract could simply release the prearranged delivery fee when the package is delivered (which could be verified using GPS).
Supply chains have been viewed as a good target for blockchain, but the same can be said of facility management. “All too often, supply chains are hampered by paper-based systems, where forms have to pass through numerous channels for approval, which increases exposure to loss and fraud,” notes a great summary of smart contracts. This approach also would automatically create a record of past maintenance calls and could automatically identify HVAC components that need to be replaced.
The worldwide market for building automation is about $120 billion. Smart equipment and the internet of things, which will connect these systems to the cloud, are becoming more common. Smart contracts could serve to automate warranties and provide refunds when equipment does not perform as expected.
Jeff Garzik, who co-founded blockchain services startup Bloq, notes that “smart contracts...guarantee a very, very specific set of outcomes. There's never any confusion, and there's never any need for litigation. It's simply a very limited, computer-guaranteed set of outcomes."
With onboard sensors to monitor equipment performance, any warranty issue could be automatically identified and the refund would be transferred automatically. This would give building operators more confidence in the products they purchase and reduce administrative costs for the vendors.
Billing individual offices for actual energy within a commercial building is a significant energy management challenge. There are regulations in some cities, such as New York, that require submetering to enable tenant billing. Right now, the process is manual and requires a fair bit of administration. Just as blockchain is starting to impact the energy grid at large, it also could provide the backbone for billing within individual buildings.
Indoor occupancy tracking
Tracking individuals within a building will enable the space to be more efficient and personal. That said, valid privacy concerns arise as more data is collected about more occupants. Blockchain could provide security and anonymity while also enabling building systems to collect more detailed data about individual occupants.
Blockchain can be used as a secure way to store personally identifiable data. For example, the United Nations is working on a digital ID system based on blockchain. Similarly, Civic is focused on blockchain-based identify management solutions to securing an individual’s sensitive, personal data.
The solution is a bit technical, but in short, blockchain enables Civic to verify someone’s identify but not store the personal data on a server. Then, by decentralizing the data, Civic generates about the given identity, they ensure that it can’t be tampered with.
Data about how someone works within a building could be stored in the same way, reducing worker concerns about indoor sensing being used as “big brother” technology.
Most co-working spaces have fairly simple tiered pricing plans: a monthly fee to access the office space, a higher fee for a reserved desk, and an even higher fee for an enclosed office. The administrative effort to bill on a per-use basis is cost-prohibitive.
But more workers would join co-working spaces if they could pay for only the time spent in the space, which could be as little as a few hours per week. Blockchain and smart contracts would remove the administrative effort to implement such a dynamic pricing model and would be highly secure.
Deloitte notes in its white paper: “As the framework illustrates, blockchain seems to be most applicable to dynamically configurable or co-sharing spaces, which have a relatively higher number of tenants and shorter duration leases compared to traditional property types.“
WeWork raised a Series G round at a $20 billion valuation. Many speculate that this valuation is justified by its goal of taking over significant shares of existing commercial office space, even spaces owned and operated by corporations. WeWork may also see blockchain as a way to increase demand for co-working space. Other co-working space operators may view investments in blockchain as a way to differentiate their offerings and capture market share.
These are just a few of the many opportunities for blockchain in facility management. The technology has the potential to disrupt facility management, just as it is positioned to fundamentally change the financial sector.
Facility data may not be as sensitive as credit cards or financial information, but there still are risks. Additionally, blockchain provides benefits beyond security, such as a reduction in overhead costs.
Building and facility management operators and vendors should embrace blockchain and consider how it may help them deliver next-generation solutions. Entrepreneurs also should consider how blockchain can remove steps in complex transactions and increase efficiency.
A blockchain-based building automation system (BAS) may seem far-fetched, but it would enable a “pay for performance,” or “BAS as a service,” business model. Additionally, the building could improve operating efficiency by accessing trend data for similar peer sites.
Such a BAS would also be more resistant to hacks. For example, setpoints would be distributed in blockchain instead of being on a single server.
Additionally, just as blockchain is being used to track food supply, it could be used to track the source of building materials to ensure a high level of indoor environmental quality, which is an emerging issue for worker health.
Joseph Aamidor is a 12-year veteran in the building and energy management industry. He frequently speaks at industry events and contributes to industry periodicals including Greentech Media. Joe has held product management responsibilities at Johnson Controls and most recently served as director of product at Lucid Design Group.