First use case
TLDR: SNTR’s first use case will be the confirmation of project and tasks execution by construction companies and their subcontractors on CiL ledger. SNTR will be used to timestamp the photos and video confirmation of all construction elements.
Now let’s dive into the details.
Silent Notary has secured its first use case in the field of building accounting automation, ramming home the growing importance of next-gen distributed ledgers and their capability. The Russian real estate market was a good illustration of a lemon market problem. A typical construction of a big apartment house in Moscow looks like this:
- The construction company buys a piece of land. Then, the groundwork and communication are laid. This stage is mostly financed through a bank loan.
- The construction company creates a render of a the proposed building, shows it off in fancy VR-headsets to potential customers and close the deal by selling them apartments in this proposed building.
- The rest of the construction is funded by the proceeds raised from the sales of the apartments.
- When all of the apartments are sold out — the construction company repays the bank, finishes the construction and take their profit…
- …except those times when the construction company goes bankrupt and some of the top officials leave the country with a stockpile of money in the offshore banks. Surprisingly, this is often the case with a large number of these ventures.
These scam cases no only hurt buyers, investors, and banks who have invested into the construction process, it has also damaged market confidence. This is why the Russian parliament recently passed a law that enforces alternative funding for real estate construction.
Effective from July 2019, this new legislation ensures that the building company’s bank loan is for the funding of the entire construction process. All buyers’ funds are locked in the bank’s escrow accounts and can only be unlocked after the construction is finished.
The expected outcomes of this legislation is:
- An increase in demand for bank loans for building construction.
- To tap into this revamped market, banks will have to deal with all of the risks of the construction process.
- To deal with the risks of the construction process, the banks now have to get into building accounting documentation analysis, which is a rabbit hole too deep to go exploring in this article.
- The prices for the services of the companies who perform construction process monitoring will skyrocket.
But what does this all have to do with blockchain and SNTR and CIL?
These market shifts increase the earnings of the middlemen employed to monitor the construction process. Like all things human, they are not without their bias and fallibility. Our business model is to remove the middlemen piece of the pie.
At the moment, we have partnered with several banks and are currently developing an automated system for construction monitoring.
How does this system suppose to work?
The construction process involves a technology called BIM-modeling. Think of it as an electronic blueprint used for price calculations and creating those renderings mentioned above. A BIM-model of a building could be viewed as a file that contains objects that represent every part of the building — every pipe, every column, every staircase and so on.
What we are doing is creating an interface that takes a BIM model as an input and produces a set of smart-contracts in the CiL distributed ledger as an output. Each smart contract is tied to an object in the BIM model which represents an element of the building and it’s status. The entire set of smart contracts represents a construction site.
Each smart contract in this set has a set if statuses like:
-locked (will be unlocked when previous elements will be finished)
-available for construction (and has a bounty that can be automatically sent to the subcontractor’s marketplace)
-construction in progress — on schedule (with a signature of KYC-identified subcontractor)
-construction in progress — past deadline
-completed (with Silent Notary verified photo and video proofs and a signature of KYC-identified construction site supervisor)
-canceled (with Silent Notary verified documents that explain why it was canceled)
The status of the smart-contracts is overlaid on the render of the BIM-model and color coded for convenience. With this interface you can just look at the virtual model of the building and instantly see how the construction process is going. All of this is doable from the office of any risk management analyst or credit officer. Before this innovation, participants could only produce this report after several weeks of meticulous inspection of the construction site and processing several cubic meters of construction reports.
When the contract for any construction element is completed, a bank checks the construction process verification data and sends the payment to the subcontractor. All sensitive data is processed by the CIL distributed ledger which makes the process as transparent as possible. Our solution also eliminates the need for credit officers to get another degree in building engineering to have any fun in digging through metric tons of paper documentation for figuring out if the construction is going as planned.
For the subcontractors it’s an uber-like ecosystem with less hustle over paperwork and worrying about getting paid. Subcontractors get paid as soon as the construction site supervisor confirms that the work has been executed properly. The payment process is automated and payment arrives directly into the subcontractor’s account. No more worrying about payment delays if the construction company goes through hard times.
To sum it up — every participant has less headache about trust and control issues and more free time and energy to get their job done efficiently.
This entire system would not be manageable without CIL advanced features like Consiliums. All the KYC data is processed by a consilium operated by KYC provider and all of the banking data is processed by the bank consilium. The transactions remain decentralized while GDPR regulations are kept in check.
Our BankStroyControl system is scalable since everything is digitalized. For those interested interested in implementing a similar system in their country, feel free to drop us a line.