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Month: March 2016

Blockchain Technology and the Engineering Profession

Blockchain Technology and the Engineering Profession

Blockchain Technology and the Engineering Profession

Blockchain protocol and technology is said by many to be among the greatest accomplishments of human intellect since the Internet.  Blockchain is the underlying technology to what is commonly known as Bitcoin, however, the technology is not exclusive to Bitcoin.  Swarms of innovators are working feverishly to design and deploy new business platforms that incorporate blockchain technology.

The blockchain protocol

However, the implications of combining blockchain technology and the engineering profession may be among the most profound.  In short, a blockchain is a computational “machine” with vaults, gears, and locks that acts as a trusted 3rd party to secure a database that is mutually shared by banks, insurance companies, corporations, and private parties. They use cryptographic “keys” instead of physical keys to open and close doors. Blockchains also include a feature where computers (owned by “miners”) compete to solve a trivial puzzle (proof-of-work) in order to open new blocks in a chain and reveal the next puzzle.  This assures that the block cannot move backwards in time therefore forming an indelible seal, or “notarization”.   This process also generates an electronic token (coin) that provides people with incentives to work hard to maintain the network. With these components, the “machinery” can automatically verify facts and execute transactions between parties where nobody can cheat.

The Professional Engineering Protocol

By contrast, for nearly 100 years, the Professional Engineer too has acted as the trusted 3rd party to banks, insurance, corporations, and the public.  The PE stamp has served to secure the public ledger of accounts related to physical infrastructure upon which modern civilization depends.  In the United States (and other countries) the PE stamp is the node of assurance that validates time and fact. Each PE is a node in a system and is individually secured by education, experience, examinations and model law. Engineers solve real puzzles in order to reveal the next real puzzle in a chain – the engineering product can never move backwards and is therefore indelible. The combination of these components provides banks and insurance companies with assurance to execute financial transactions and payments whose value is, in fact, stored in public infrastructure and productivity.  Nearly all actuarial data used by banks and insurance companies is tied somewhere to the professional engineering stamp of assurance.

The problems with Blockchain

Part of the problem plaguing cryptocurrencies is that they are virtual assets and can never meet the intrinsic standard of representing a real physical asset. This problem may be solved if professional engineers were to adopt blockchain as their own new iteration of the PE stamp.

There is no shortage of crypto-pundits who wax poetic over the ideals of a decentralized universe thanks to the miracle of the blockchain.  Meanwhile, speculators fawn over Bitcoin’s potential as an alternate currency, possibly a black market currency, without really understanding the nature of currency itself.  The truth is that money must represent human productivity otherwise people would not be willing to work in exchange for it.  Human productivity is the domain of engineering, period. 

The Opportunities for Blockchain in Engineering

Needless to say, the opportunities to deploy blockchain technology in the engineering profession cannot be overstated.  The professional engineer represents a “smart key” that can open and close smart contracts on a blockchain.  All contracts ultimately must lead to a physical entity and more often than not, that physical entity is tied to an engineering stamp somewhere in it’s value chain. This is a fact.

What you will not find is a collection of experts who understand the direct analogy of blockchain technology to the institution of professional engineering as deeply at the researchers at Coengineers. It is almost as if the Bitcoin designers came to the conclusion that professional engineers had it right all along.  Coengineers, PLLC is now at the forefront of this industry, at the global level.

Give us a call and we will help you develop blockchain applications specific to your engineering business methods.  We understand the technology, the platforms, and the developers. Industry, government, banking, and insurance are all beneficiaries of blockchain applications adjudicated by professional engineers.  We are Coengineers, we build together.

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Coengineers, PLLC is currently leading the Financial Technologies Task Force for the National Society of Professional Engineers.  The objective of the task force is to research the implications and discover the opportunities to deploy Blockchain Technology to the Professional Engineering Disciplines. [Reference: The Bitcoin Protocol and Future Currency Impacts on the Engineering Profession ]

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BidPool Adjudicated Smart Contract Game

coengineers.comProblem:  Many contractors say that their COGS (cost of goods sold) consumes 10-30% of their expenses. Obviously, this cost is passed on the customer.  Bidding can be made far more efficient with BidPool Adjudicated Smart Contract Gaming platform.

For example: 5 contractors may spend $10K bidding on a 1 million dollar project that only one will win. Further, each contractor may only win 1 out of 5 bids submitted. These losses are ultimately passed on to the market in increased cost, lack of industry collaboration, and influence peddling. As such, the cost of bidding is represented by the following relationship:

Cost of bidding = COGS multiplied by Number of Bidders

Adjudicated smart contract: Consider a process where a project owner and all 5 contractors (or more) each put a $10K promissory note into a blockchain  escrow account. An engineering firm such as Coengineers, PLLC will then perform a 3rd-party project definition report and Statement of Work that collects all relevant information that the contractors would need to bid on a job. All contractors are then invited to an electronic RFP.

Game Mechanics: Whoever wins the RFP pays (by escrow release) $10K to Coengineers, PLLC for the SOW report. The losers pay nothing. If the owner does not select a contractor, the owner then pays for the report and can use it to hold another contest in the future. These savings are ultimately wrapped into the discount of the projects according to the following relationship:

Cost of bidding = COGS divided by number of bidders

Aligned Incentives: Where there is no penalty for either winning or losing, the incentive to cheat is reduced. The Value Game realigns major incentives and the projects benefit from.

  • Improve matching of qualifications to the project
  • Improve quality and seriousness of owners (no “tire kickers”)
  • Eliminates bidding redundancy
  • Everyone bids “apples to apples”
  • Rewards collaboration and intangible assets
  • Reduces project variance (i.e., change orders)
  • Reduces marginal cost of additional bidders
  • Opens market to more bidders (prediction markets)
  • Increases transparency
  • Reduces project costs
  • Insulates conflict of interest
  • Resistant to corruption

Additional benefits:

A comprehensive project definition can be used for many purposes downstream:

  • Contractor RFI/RFP
  • Master Schedule
  • Bank Financing
  • Project Insurance
  • Statement of work
  • Contract language
  • Inspection compliance
  • Construction and Accounting Forensics

Scalability:

Future advancements in financial technologies such as the Blockchain protocol and Knowledge asset networks such as the Curiosumé protocol will allow BidPool to scale infinitely to many project types, markets, and jurisdictions.

Summary:

BidPool is a Value Game that reduces the cost of procurement, increasing project assurance, and realigning market incentives to reward high integrity and not reward low integrity. By introducing simple game mechanics and deploying modern financial and knowledge Asset technologies, BidPool may generalize procurement across markets and industries with direct lineage to the banking, insurance, and engineering sectors.

For more information contact Coengineers.com

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