What Is Blockchain Technology? How It Works and Why It Matters For Your Business

If your business needs to maintain accurate and audit-ready records, you’ll want a system that can prove what happened — and when. Blockchain technology could be the answer. 

But what is blockchain? And how does blockchain work?

Blockchain organizes and protects your data with built-in transparency and tamper resistance. This shared ledger technology keeps a permanent, traceable history of every transaction across all participants, making it nearly impossible to alter records or manipulate outcomes.

Sound interesting? Today, we’re giving you a crash course in all things blockchain, including what it is, how it works, how other companies have used it, and why it might be the right choice for your business. 

How does blockchain work?

Think of blockchain as a ledger that writes in permanent ink and instantly shares updates with everyone involved.

When someone adds a new transaction or data, it’s bundled into a block with other transactions. Some of the information in the block may be encrypted, but what truly makes the blockchain immutable is that each block has it’s own hash — a unique identifier that can’t be changed.

This block is then encrypted and linked to the previous one through its hash to form a chronological chain of blocks or a blockchain. 

What prevents tampering?

In a blockchain, nothing gets added until the network reaches consensus — until a majority of participants (called nodes) agree that the data is valid.

Every change is also automatically tracked and timestamped. Once recorded, data can’t be altered without triggering a visible update across the entire network. So, no one can quietly edit past records without everyone else knowing.

Blockchain application example in practice

A food company wants to trace ingredient origin to prove ethical sourcing. It can ask supply chain partners at each stage to record key details on the blockchain, like where the shipment was harvested, which batch it belongs to, and when it was delivered.

Each handoff is logged and verified as the product moves, so by the time it reaches store shelves, both the company and its customers can trace every step.

No party can change dates without it being flagged across the network. This means validators detect and can reject any attempt to alter records, keeping the blockchain tamper-proof.

Different types of blockchain networks

There are three main blockchain network options: public, private, and permissioned. It’s important to understand their differences before you build on blockchain.

Here’s how they compare:

Feature	Public	Private	Permissioned
Access	Open to anyone	Limited to approved participants	Restricted access with defined roles
Governance	Decentralized	Centralized (single organization or group)	Hybrid (company or consortium oversight)
Transparency	Fully transparent	Private by default	Controlled, shared only with relevant parties
Data privacy	Minimal — everything is public	Strong privacy controls	Strong privacy with role-based access
Speed and scalability	Variable speed, affected by consensus mechanism & network congestion	Fast and scalable	Fast and scalable
Security model	Distributed consensus	Managed internally	Based on identity and role-based permissions
Energy use	High (especially with Proof of Work)	Low	Low
Integration	Requires careful integration with internal systems	Designed for enterprise integration	Designed for business collaboration
Compliance and auditing	Challenging due to public visibility	Easier with internal controls	Supports compliance and audit-friendly access
Trust model	Trustless relies on cryptographic proof & consensus	Trust in central authority	Trust among verified participants
Ideal use cases	Open innovation, DeFi, NFTs, public utilities	Internal data sharing, supply chain, and finance	B2B collaboration, regulated industries

Let’s dive deeper into each type and the pros and cons of blockchain:

Public blockchain

A public blockchain is open to everybody — anyone from anywhere can join, view transactions, and participate. No central authority is required.

Public blockchain example:

Ethereum is among the most well-known public blockchains today. It powers thousands of dApps and smart contracts, from DeFi platforms like Uniswap to NFT marketplaces like OpenSea.

Unique characteristics of public blockchains

• No single entity controls the network
• All transactions are visible to every participant
• Once added, data cannot be altered or deleted — only new data can be appended
• Uses Proof of Work (PoW), Proof of Stake (PoS), or similar methods to validate transactions
• Anyone can build, transact, or validate

Pros of public blockchains	Cons of public blockchains
Public, verifiable audit trail; No reliance on central authority or intermediaries; Resistant to censorship and tampering; Strong security through distributed validation; Open to global innovation and development (such as DeFi, NFTs).	Potentially slower and more costly at scale; High energy consumption (especially with PoW); Public visibility may pose privacy challenges; Regulatory uncertainty in many regions; Theoretical risk of 51% attacks (unlikely in mature networks); Protocol-level upgrades require community consensus.

Private blockchain

This type of blockchain runs on a closed network governed by a single authority, which controls who can access and validate data, unlike permissioned blockchains, where governance is shared among multiple participants. 

Private blockchain example

JPMorgan Chase uses Quorum to process cross-border payments and settle transactions between partner banks in real time. This private blockchain shrinks settlement times from days to minutes while keeping transactions confidential.

Unique characteristics of private blockchains

• Transactions are hidden from outsiders
• Only authorized users can participate
• Fewer nodes and simplified consensus improve speed
• Tailored to meet specific organizational needs
• Lower resource requirements than public chains
• Data access is limited to relevant stakeholders
• Designed to integrate with internal systems

Pros of private blockchains	Cons of private blockchain
Full control over network rules and access; Strong privacy and data protection; High speed and scalability for internal use. Lower operating costs; Supports regulatory compliance and audit needs; Secure, trusted environment for internal teams; Smaller environmental footprint;	Limited transparency — no external third-party verification; Limited access to public developer ecosystems; Complex to integrate with public chains; Potentially higher setup and maintenance costs; Governance disputes may arise internally;

Permissioned blockchain

Participants in permissioned blockchains are pre-approved and assigned specific roles to restrict who can access or write data.

This type of network shares private blockchain’s advantages but is better suited for structured collaboration between known entities, where governance and access control are shared among multiple participants (such as joint venture participants or supply chain partners).

Permissioned blockchain example

Visa’s B2B Connect platform uses the permissioned blockchain Hyperledger Fabric to remove intermediaries and reduce settlement times for bank-to-bank transactions.

Unique characteristics of permissioned blockchains

• Built for regulated industries that require traceability
• Authenticates and assigns specific roles to users
• Only relevant data is shared with authorized parties
• Often designed for internal or sector-specific use
• Role-based access reduces fraud and unauthorized activity

Pros of permissioned blockchains	Cons of permissioned blockchains
High security through strict identity and access controls; Fast, scalable, and enterprise-friendly; Strong data privacy; Easier to align with regulatory requirements; More efficient than high-energy public chains; Customizable for industry-specific needs; Trusted environment among known participants;	Governance is shared, but it is still more centralized than public networks; Shared governance creates potential for mismanagement; Limited ecosystem for external development or innovation; Requires trust in internal governanceComplex cross-chain integration; May involve a significant initial investment;

12 Essential Blockchain Terms

If you’re exploring how blockchain could fit into your organization, start with these key terms — they’ll help you make sense of the technology and its potential.

Blockchain advantages for businesses

Here are the advantages of blockchain and how they play out in practical scenarios:

Stronger security

Blockchain distributes encryptographically secured data across a network to remove single points of failure and make tampering extremely difficult. Access can also be permissioned and anonymized.

Hospitals can use it to secure patient records and control access across providers, insurers, and labs. In the pharmaceutical industry, blockchain can track every batch from production to distribution to stop counterfeits and support instant recalls when safety issues arise.

Built-in transparency

All participants view the same verified data through a shared source of truth. This minimizes mismatches and disputes.

Public agencies can use blockchain to digitize regulated documents and official records, including contracts, benefits, licenses, and permits. This helps curb fraud and speed up verifications.

Automation through smart contracts

Smart contracts trigger actions when conditions are met — no manual reviews, delays, or third-party intermediaries.

Insurers use smart contracts to automate claims and underwriting. This near-real-time data validation speeds up service and prevents fraud.

Faster, leaner operations

Blockchain replaces paper-based workflows with instantly synchronized digital records, and all parties work from a shared source of truth. No duplication, no back-and-forth.

Banks can streamline cross-border payments and trade finance with blockchain. Many payment networks now use it to settle transactions in minutes and deliver faster, more transparent service to global clients.

Chronological record keeping and instant traceability

Every asset on a blockchain comes with an auditable trail showing where it’s been, who touched it, and when. The ledger stores data in a permanent, time-stamped sequence — each entry is locked in order, making it easy to prove when something happened and who was involved.

An animation studio can log every version of a film script or storyboard on the blockchain to create a time-stamped record that proves authorship and simplifies IP disputes.

Is blockchain right for your business?

Blockchain might be worth exploring if you answer yes to any of these, but it’s important to assess whether the technology truly fits your business needs and goals:

Do you need to eliminate intermediaries or third parties? Blockchain lets participants transact directly with one another to process payments, sign contracts, or exchange assets, potentially reducing reliance on brokers or clearinghouses where appropriate.

Is transparency and traceability critical? Blockchain gives you a near-real-time, tamper-proof record of activity. You can track every transaction, verify ownership of assets, and generate audit trails on demand for regulatory reporting.

Are you handling sensitive data that needs strong security? Blockchain protects your data through cryptographic integrity and decentralized validation. No single party can tamper with records, and any attempt to do so is immediately visible across the network. For highly sensitive data, encryption and off-chain storage can be combined with on-chain proofs.

Do you require immutable record-keeping? Once a transaction is recorded on the blockchain, it becomes permanent. You can preserve long-term records, like legal agreements and audit logs, without risk of backdating or deletion.

Are multiple parties involved and need to share data securely? Every authorized participant sees the same version of the data in the shared ledger without needing to rely on a central intermediary. You can define roles and make sure that everyone is working with the same up-to-date information.

High-impact blockchain case studies by company size

The uses of blockchain go far beyond crypto. This technology supports companies of all sizes, from startups building token tools to global firms needing enterprise blockchain solutions. 

Here are some great examples of what businesses of all sizes have accomplished with blockchain technology:

Company and size	Blockchain project	Business impact
Hyperspace (Web3 startup)	NFT marketplace performance upgrade	Cheesecake Labs redesigned Hyperspace’s front end, optimized IPFS (decentralized asset storage) data loading, and added Apollo Cache and Ably for faster browsing and real-time updates. All these improved UX and sped up NFT trading decisions.
Mercado Bitcoin (Mid-to-large exchange)	Token Factory on Stellar	Mercado Bitcoin partnered with Cheesecake Labs to build a token issuance tool on Stellar. The Stellar Asset Sandbox tool supports MBRL (a Real-backed stablecoin) with wallet creation (via the Freighter browser wallet), asset management, and backend integration using Python/Django and Stellar APIs.
Stellar Development Foundation (Mid-sized nonprofit)	Stellar Aid Assist and SDP scaling	SDF enlisted Cheesecake Labs to expand Vibrant wallet integration and scale the Stellar Disbursement Platform for humanitarian aid. The platform — which has won awards for innovation and impact — delivered digital funds in Ukraine and now supports multiple organizations.
MoneyGram (Enterprise payments company)	MoneyGram Wallet	Cheesecake Labs developed a Stellar-based non-custodial wallet with USDC support. It featured SEP30 recovery, a scalable backend, and a rollout strategy that helped MoneyGram expand global digital access while keeping the UX beginner-friendly.
Hitachi (Enterprise manufacturing)	Blockchain-based procurement system	Hitachi used Hyperledger Fabric (a permissioned blockchain framework) to digitize contract workflows for 3,500+ vendors. The system reduced fraud risk, cut paperwork, and improved accuracy in monthly procurement agreements.
Renault (Enterprise automotive)	Regulatory compliance blockchain	Renault and IBM created a platform to manage 6,000+ compliance requirements per vehicle. It improved traceability and ESG reporting while slashing compliance costs by 50%.
Ford (Enterprise automotive)	Cobalt traceability in EV batteries	Ford used blockchain with IBM and RCS Global to trace cobalt from certified mines to battery production. The system verified ethical sourcing with IoT data and reduced ESG risk.

Blockchain costs and project timelines

Blockchain application development isn’t wildly different from any other digital product when it comes to costs — it all depends on what you’re building.

App development (whether blockchain-based or not) generally ranges from $5,000 to $500,000. You could throw something together yourself with minimal investment, or go all-in with a seven-figure platform if it’s mission-critical for your business. Most projects fall somewhere in the middle.

If you’re building a custom MVP with blockchain integration, expect to spend between $100,000 and $300,000 when you hire blockchain developers. This estimate accounts for UX/UI design, smart contract development, blockchain infrastructure, backend services, and front-end development.

Complexity is the biggest cost driver. The more sophisticated your app’s integrations and security requirements, the more hours your blockchain app development company needs, and the higher the cost.

Here’s a general snapshot of blockchain implementation costs and timelines:

App type	Average cost	Timeline
Simple app	$75,000 – $150,000	~3 months
Average complexity app	$150,000 – $250,000	3 – 6 months
Complex app	$300,000+	6 – 9+ months

Cheesecake Labs’ 3-phase delivery method

Whether you’re launching a new blockchain product or applying blockchain to internal processes, our blockchain development services meet you where you are and get you to market faster.

Why Cheesecake Labs is your ideal blockchain development company

• Nearshore, in-sync: Our Brazil-based blockchain development company works in real time with clients in North America and Europe.
• Proven blockchain delivery: We’ve shipped real-world blockchain solutions for banks, startups, nonprofits, and Web3 platforms — from cryptocurrency wallet and disbursement tools to NFT marketplaces and compliance systems.
• Stellar integration partner: As an official Stellar Development Foundation partner, our blockchain development agency has been vetted for our deep knowledge of the Stellar network, and we can bring that expertise directly to your project, including experience with Soroban, Stellar’s smart contract platform.
• Recognized by the Linux Foundation: Cheesecake Labs is a proud member of the Linux Foundation’s LF Decentralized Trust initiative and a Certified Services Provider (CSP) for Besu. These credentials reinforce our commitment to developing open, enterprise-ready blockchain solutions with trusted governance and Ethereum compatibility. 

Blockchain FAQs