This diagram shows how commitment tokens would work to distribute funds from the construction loan to the project owner, subcontractors and manufacturers.
The lending institution behind the construction loan would issue "commitment tokens" to the builder, which the builder could then distribute to subcontractors when a bid is awarded. Once the subcontractor completes the work, which could be scheduled and accounted for daily, the builder could approve the token and the subcontractor would be instantly paid.
Likewise, any supplier, such as an HVAC manufacturer, could be paid by the subcontractor using the tokens, which would be activated upon delivery. Bowden said this approach would help builders using the tokens be more attractive to subcontractors — in a market that is currently short on subcontractors, which can delay work and drive up construction costs — since they would be paid instantly.
It would also reduce liability across the board since payment for goods and services would be instantaneous and would be tied directly to the construction loan.
For all the potential it holds, Bowden said his mission isn't to proselytize about blockchain. "I want to create real value and real impact in improving the construction industry's efficiency," he said. "I don't look at the blockchain as the end, I took at it as the means to the end."
Hear more about blockchain and other technology disrupting the industry at Bisnow's CRE & UrbanTech Summit Oct. 18 at the Omni San Francisco.