How Can Blockchain Benefit Payment Systems in Smart Construction Contracts: A Brief Review

Abstract

Abstract Construction industry professionals suffer regularly from poor cash-flow which reflects non-payment or payment delays down the hierarchical chain. This issue is important as the construction industry has the highest rates of insolvency in Australia, the UK and many other countries. Payment conditions under current construction contracts have proven to be inefficient in delivering timely payments as human interference has control over processing claims. This paper investigated the status of contracts and contract law in Australia and the potential of smart contract technology in improving payment issues in the industry. Qualitative data was collected from secondary literature sources which included observations from industry professionals, real case studies, secondary research and government surveys. It was found that smart contracts feature self-executing digital contracts, immutable data, require no intermediaries and provide transparency on all levels. Although these features are fit for purpose in resolving current contractual issues, smart contracts are not yet available in the construction industry. It was also found that smart contracts do have the potential to provide a trusted and reliable payment system in the construction industry, although there are some aspects it is unlikely to replace such as human performance. Research limitations and future research directions are also provided.