Blockchain is a record keeping system first developed by the pseudonymous creator of Bitcoin, Satoshi Nakamoto. The principle is simple: transactions are grouped into blocks, validated by the miners and stored in a chronological “chain” on all the nodes (computers) of a network. This means that the data is widely disseminated and easily accessible to all participants.
This is important because all copies of the data must be identical. If an individual user attempts to change the information, the network will reject the change and revert the blockchain to its previous state. In other words, a blockchain is a transparent, secure and autonomous database. And while these registries have gained fame as the technological foundation of cryptocurrencies, they can be usefully applied to a wide range of industries.
Among the notable early users of blockchain technology are Microsoft (NASDAQ: MSFT), PayPal funds (NASDAQ: PYPL), and salesforce.com (NYSE: CRM). Here’s what investors need to know about the impact of blockchain on the future of these three companies.
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In 2018, Microsoft partnered with British consulting giant EY (still well known by its old name, Ernst & Young) to create a blockchain network that automates video game royalty payments. Specifically, the network enables smart digital contracts to be encoded that automatically execute as transactions occur, improving transparency and efficiency for Microsoft, game publishers and developers.
Publishers can now access royalty information in minutes, instead of the 45 days it used to take. And Xbox financial operations are now 70% more efficient, according to Rohit Amberker, CFO of the royalties and content operations team.
This royalty payment solution is powered by Microsoft’s Azure Blockchain Service, a platform that simplifies the development of blockchain networks and applications. But other customers are also using the service, and their solutions are equally impressive.
For example, General Electric Aviation has built a blockchain network to track aircraft parts. This is important because airlines cannot use any part unless they know its full history, resulting in significant waste in the aviation industry. In particular, this solution allows the company to access verified data in real time, thus eliminating the need for inefficient tracking via paper documents. In fact, the efficiency of blockchain could improve industry revenues by up to 4% per year, or $ 40 billion, according to some analysts.
Starbucks uses Azure blockchain technologies to ensure its products are sourced ethically. Using the mobile app, consumers can scan a code on the company’s packaged coffee and find out exactly where the beans were grown. The network also allows farmers to follow the movements of what they produce, providing valuable transparency. For example, some farmers may not know their product is export grade, so this technology gives them insight into the quality of their beans.
As more companies adopt blockchain-based solutions, Microsoft’s global cloud computing platform is expected to make the company a key player in the space.
PayPal benefits from blockchain in a more traditional sense. In October, the company began allowing users in the United States to buy, sell, and hold Bitcoin and three other digital currencies through the PayPal app. The company plans to bring the same functionality to Venmo and international markets in the coming months.
Its fintech rival Square enabled its Cash App users to exchange bitcoins since 2018. Since then, both Cash App users and user engagement have trended upward, resulting in a significant increase in gross margin.
PayPal is expected to see similar benefits over the next few quarters, but the company has even bigger plans. Last month, PayPal launched its Checkout with Crypto service, allowing consumers to make purchases with Bitcoin (and a few other digital currencies) directly from the PayPal app. Ultimately, the company plans to make this option available to all of its 29 million merchants.
It would be a big step towards legitimation cryptocurrency as a means of payment, and this could be a powerful engine of growth for PayPal in the years to come.
3. Sales force
Salesforce helps its customers develop and maintain relationships with their own customers. Specifically, the Salesforce Customer 360 platform unifies data from sales, customer service, marketing, finance, and other departments, making it easier for different teams to work together.
As part of Customer 360, Salesforce offers a low-code application platform it allows anyone to develop software, even if they do not understand the computer code.
As a longtime innovator, Salesforce recognized the potential of blockchain in 2019 and incorporated it into their low-code platform. Customers can now build blockchain-based networks and applications through Salesforce, much like Microsoft customers use Azure Blockchain Service.
While this hasn’t been a noticeable growth driver so far, it does add substantial value to the Salesforce platform. Blockchain has the potential to reshape many industries, and Salesforce is well positioned to capitalize on this trend.
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Teresa Kersten, an employee of LinkedIn, a subsidiary of Microsoft, is a member of the board of directors of The Motley Fool. Trevor Jennevine owns shares of PayPal Holdings and Square. The Motley Fool owns stock and recommends Bitcoin, Microsoft, PayPal Holdings, Salesforce.com, Square, and Starbucks. The Motley Fool recommends the following options: $ 75.0 long calls in January 2022 on PayPal Holdings and $ 110.0 short calls in April 2021 on Starbucks. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.