Optimizing Construction Payment Systems Through Blockchain-Enabled Smart Contracts

Abstract

This study explores the transformative potential of smart contracts in addressing the challenges of progress payments in Turkey's construction sector, particularly focusing on issues such as delays and financial insecurity. We propose a system that leverages Ethereum-based smart contracts to automate and secure payment disbursements, ensuring prompt and reliable transactions. The system integrates on-chain mechanisms for hashing documents and an off-chain application for efficient document storage, thereby minimizing blockchain resource usage and reducing transaction costs. Preliminary testing on the Sepoli test network demonstrated the system's ability to significantly reduce payment latencies and operational costs. This research outlines the technical setup and economic benefits of the proposed system, emphasizing its potential to streamline construction payments through digitalization and legislative adaptability while acknowledging the development limitations of the off-chain application.