High-quality infrastructure is important for economic growth. Local governments and construction companies could use blockchain technology to keep track of materials, permits, and contracts. Blockchain technology, underlying cryptocurrencies, can help improve infrastructure.
Continued economic growth means routinely reallocating resources to their highest-valued use as new opportunities arise, and this process is hindered when roads, bridges, airports, subways, and broadband are in poor shape.
Infrastructure spending, for example, by the federal government in the U.S., as a percentage of all federal spending, was 2.5% in 2017, which is about what it was in the mid-1980s. A larger portion of spending has gone to operation and maintenance rather than capital outlays, even in a mature economy like the United States.
Blockchain Technology to Increase Efficiency
Spending is useful when it’s allocated to the most beneficial projects and when it’s closely monitored to limit waste. There’s plenty of evidence that infrastructure costs are significantly high and that these higher costs are due to outdated government regulations, the bidding process, and poor oversight.
While using current spending more efficiently is important, that doesn’t preclude putting additional money to good use, especially if it’s raised properly.
Blockchain Technology and Funding
A potential funding source is crowdfunding facilitated by blockchain technology. Blockchain technology is essentially a publicly distributed ledger that keeps track of transactions and ownership of assets, which could be digital currencies, patents or physical objects like rare art or buildings. Blockchain technology also allows ownership of physical assets to be broken up into small parts and makes it easy to keep track of all the owners.
Blockchain technology has the potential to open up all sorts of investments to the average person. For example, a new toll bridge could be funded completely or in part by individuals who then get a portion of the tolls commensurate with their investment. Today, these types of public-private partnerships, or PPPs, are not available to the average person. Highways, convention centers, stadiums, parking garages, rail projects, and other infrastructure with a potential revenue stream could be funded similarly.
Importantly, more local funders mean more people with a stake in the progress of the project, and this means more accountability for those in charge. Additionally, local governments and construction companies could use blockchain technology to keep track of materials, permits, and contracts.
Blockchain Technology and Claims
Andrew Lindsey, a market strategist for the Alpha Corporation, says that today it’s hard to know exactly who holds what and when on large infrastructure projects. He believes blockchain technology can fix this.
Lindsey believes that, when one has a very clear snapshot of all of that information, one can see what would happen to claims. Currently, claims are handled with a spreadsheet that says “X is going to arrive here within this timeframe with this level of error.” But if you have an immediate, encrypted and immutable ledger of the flow of items, one can identify exactly what is going to be where, when and one can reflect that in schedules, cost estimates, and more broadly, phase engineering.
Since the ledger would be available for all to see, the companies and officials responsible for the project wouldn’t be able to kick the blame for delays and cost-overruns back and forth while the public struggles to sort fact from fiction. Instead, those responsible for problems could be identified and held accountable.
Infrastructure is important for economic growth. Blockchain technology won’t solve all the problems, but it has the potential to make a big difference.