Blockchain is a term that has been tossed around the digital financial sector, increasing its popularity in the tech world.  From 2017 to 2018, searches for the word blockchain on Google increased by 250 percent but how it can be applied to other industries apart from Bitcoin remains a little foggy. Financial services are much different from physical structures such as roads, airports and water systems. Unlocking blockchain’s potential in the Mexican infrastructure industry will take time to truly master but it can transform from how water and energy are distributed to how large projects are constructed and maintained.

Blockchain 101

One of the values of blockchain is its distributed format, which makes it extra secure. “The blockchain is an incorruptible digital ledger for economic transactions that can be programmed to record not just financial transactions but virtually everything of value,” say Don and Alex Tapscott, authors of Blockchain Revolution. There are always two sides to a story when it comes to business transactions and the goal is to ensure transparency and security of whatever is being traded. When a transaction takes place, each party has its own ledger which increases the probability of error, fraud and inefficiency.

According to IBM, blockchain not only can make transactions more efficient, but it also allows participants to see the details of a transaction end-to-end and increase security. Blockchain can reduce the complexity of a transaction through a single shared ledger that cannot alter transactions, requires consensus from all parties before a new transaction can be added to the network and it eliminates paper trails, making it a quicker and easier process. This sounds particularly good for services and goods providers but adapting this to the infrastructure industry is more intricate and requires great creativity. If adapted correctly, the benefits the cities and companies could reap from blockchain are immense.

The Main Issues in Infrastructure

Infrastructure development encounters similar issues across the globe. Transparency is one of the biggest concerns across the construction industry, stemming from processes such as right of way liberation processes, land acquisition and project tenders. According to WEF, approximately 10-30 percent of the value of the global construction industry is lost through corruption and about the same is lost by mismanagement and inefficiency.

Infrastructure is particularly vulnerable to corruption due to the uniqueness of each project, complex transaction chains and the immense scale of investments made into each infrastructure development.According to the Transparency International Corruption Perception Index, Mexico is one of the least transparent countries with a rank of 123 of 176. Mexico needs innovation in how it carries out its infrastructure transactions and blockchain could just rescue the industry.

Ellis Talton and Remington Tonar, founders of Stateof compare the difference between carrying out a financial transaction to physical infrastructure. “The data corresponding to an infrastructure transaction is merely metadata. It represents the underlying physical thing that is being transacted but is distinct from the thing itself. Financial data, by comparison is not the representation of money, it is the money. Because of this, infrastructure stakeholders typically think of their job as moving or supporting the movement of physical thing from one place to another, be it water, electricity or goods.”

Blockchain would offer the industry the opportunity to increase efficiency, reduce costs and evolve how physical commodities are distributed and consumed. According to Stateof, the IIoT can optimize physical systems through sensors, data and connectivity but its applications are still built on top of existing devices and processes that may improve how things work but do not fundamentally alter the structure of infrastructure. Schindler, a global mobility solutions provider is pushing innovation through the use of Digital Twins.

Safer Infrastructure Transactions for Better Development

As the IIoT and Big Data continue to play a larger role in the operation and construction of infrastructure, safety will continue to be a growing issue in the years to come. All over the world there have been high-profile attacks on infrastructure and the need for new solutions to keep information and utilities secure will be a problem in the future. For example the Ukrainian power grid attacks that took down its power grid through malware and The Kosciusko Institute released a report that predicts that 2018 would be a year of cyber-attacks on critical infrastructure. Because blockchain does not require approval from a single authority and it blocks its transactions within blocks, it could be the solution to boost security. This would protect not only infrastructure assets but also the safety of citizens that utilize it to ensure it cannot be hacked or modified.

In order for blockchain to have an impact on infrastructure development, it does not have to be limited to the assets or infrastructure projects themselves. In 2018, the University of West Virginia, Infrarural, the Ministry of Public Function and UNAM developed a project using blockchain technology where migrants living in the US could invest in the infrastructure development of their local communities in Mexico. Use of blockchain technology would ensure that their remittances would be securely deposited into a fund that would be used to improve their home towns.

Another example where blockchain could contribute is in the case of national emergencies. Mexico had several earthquakes in 2018, and millions of pesos were donated from all over the world to help reconstruct and help the communities affected by the earthquakes. According to the Belisario Dominguez Institute, by December 2017 more than MX$3.4 trillion were donated to the earthquake victims. The Fuerza Mexico trust fund was created to gather all donations and government resources that would be distributed to the victims and allocated to the construction of affected communities. Integrating blockchain into situations such as this can ensure that the money is going where it is supposed to and its transactions are transparent throughout the entire chain.

In the end, the use of just one technology will not guarantee the security or success of infrastructure development. The integration of technological solutions, along with best practices and creativity will help boost the development of efficient and more sustainable projects in the long term.


Source: Pwc


Sources: Stateof, Pwc, IBM, Endeavor Mexico

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