During a recent interview, Salesforce CEO Marc Benioff teased a still-in-the-works blockchain product, triggering an audible murmur from online tech and crypto communities. “I hope that by Dreamforce,” Benioff said, “we will have a blockchain and a cryptocurrency solution for Salesforce and for all of our customers.”
Details about the product are scant (okay, nonexistent), but that won’t stop interest from growing. These days, blockchain is becoming a mainstream fascination, with more and more people looking to understand what it is and what it does.
If you need a blockchain crash course before the launch of Salesforce’s new product, this primer’s for you.
What is blockchain?
Blockchain is a kind of distributed ledger technology. A distributed ledger is “a database held and updated independently by each participant... in a large network.” Rather than records being conveyed by a central authority (like a bank or government agency), they’re individually constructed and kept by every participant. As noted in Forbes, this aspect of the technology “guarantees an immutable transaction with no need for intermediary institutions that would take a cut of or would delay the transaction.”
You probably associate blockchain with the cryptocurrency Bitcoin, and for good reason: blockchain is the technology that powers bitcoin, and they were both invented by the same person (whose identity happens to be unknown, in case techno-mysteries are your thing). Blockchain goes far beyond bitcoin, of course — the MIT Technology Review says it “can be used for all kinds of valuable data” — but we’ll stick with a cryptocurrency example to illustrate how the technology works.
It starts with a transaction: Person A decides to send “money” (cryptocurrency tokens) to Person B. To prove that he actually has the amount of money he wants to transfer, Person A’s transaction must “reference a past transaction on the blockchain.” We’ll go into more detail about what that means in a minute, but for now you can think of it like paperclipping a bank statement to a check — proof that you’re good for it.
At this point, the transaction is distributed to other computers known as nodes. These computers belong to people just like Person A and Person B — participants in the same blockchain network. Assuming the transaction between A and B has met the particular requirements of a given cryptocurrency, the nodes will validate it. This validated transaction is then added to a list of other validated transactions, known as a “block.” Each block contains a “cryptographic reference to the previous block” — hence, a chain of blocks.
Are you with us so far? Good, because things get weirder from here.
A block can only be “completed” by solving an extremely difficult mathematical puzzle — and the nodes are the entities trying to crack it. In fact, many are racing each other to be the first one to figure it out. The reason? For many cryptocurrencies, the node that solves the puzzle first is rewarded with some number of tokens. Occasionally, this quest for digital coin leads people to try extreme (and illegal) strategies.
But back to Person A and Person B. Once the puzzle has been decoded and the block containing their transaction has been completed, it officially becomes part of the blockchain. And since “each block also contains a reference to the previous one,” they’re all tied together. This is what makes it so hard for a hacker to tamper with a given transaction — if they wanted to modify one block, they’d have to modify all of them.
And there you have it: Person A has made a secure digital payment to Person B without the interference of a middleman. That’s blockchain in a nutshell.
Take a breather, if you’d like.
What is the future of blockchain?
Blockchain is predicted to disrupt, among others, the following industries:
- Central banks
- Money transfer
- Identity and privacy
- Smart contracts
According to MIT Sloan assistant professor Christian Catalini, this is because blockchain has the power to reduce the cost of verification and the cost of networking. “Every business and organization engages in many types of transactions every day,” Catalini says. “Each of those transactions requires verification.” With blockchain, every transaction can be viewed and verified at no cost.
As for saving money on running a network, that takes us back to eliminating the need to intermediaries. “Those intermediaries are costly and earn rents for processing payments, maintaining a reputation system, matching demand and supply,” Catalini said. With blockchain, participants do these things for themselves.
Perhaps more surprising, however, is the outlook for blockchain’s ability to effect change in the world of social impact. According to Forbes, “[d]igital currencies and the ability to tokenize assets opens up new ways for donors to give.” One example they cite is the World Food Programme, who estimates that blockchain “will reduce overhead transaction costs from 3.5% to 1% or less, saving millions of dollars.”
How will Salesforce harness the power of blockchain?
As mentioned earlier, nobody really knows. The Motley Fool has this to say: “It could be as simple as integrating a payment processing system for cryptocurrencies into its current Commerce Cloud division. Or it could be a little more cutting edge, like a smart contracts system for crowdfunding or business development.” Others have pointed out that the company praised distributed ledger technology’s ability to “verify and maintain contracts, send transactions, and automate trust” at a recent CPQ briefing.
For real answers, we’ll have to wait. The good news, though? Now you’ve got some blockchain basics under your belt. By the time Salesforce’s new product is announced, you’ll be ready to use it.
Which industry will you disrupt?