How Does Blockchain Work For Small Business

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Blockchain is the technology that most cryptocurrencies are built on, and it’s now also being used for many other applications. Here’s how blockchain technology works, where it got its start, and how big and small businesses can use the technology today and in the future.

Key Takeaways

  • Blockchain is digital ledger where information is stored and it is called so because data is stored in blocks of information and then linked together in a chain or sequence
  • Blockchain is the technology and infrastructure upon which most cryptocurrencies are built
  • Each transaction on the blockchain is verified and it is considered difficult to modify data on a blockchain
  • Small businesses can leverage blockchain for secure data storage, access to digital currencies as well as foraying into smart contracts

The Basics of Blockchain

Blockchain is a decentralized public network that allows people and companies to store and securely transfer information and currency instantly.


The term blockchain also refers to how the data is stored in ”blocks” of information and then linked together in a permanent “chain.”

When a new block is added to the chain, it makes the previous blocks even harder to modify, which helps each block become more and more secure over time. There are several facets that make blockchain technology unique and valuable for many different types of business applications.

Blockchain Is Accurate

Blockchain is highly accurate. Every action in a blockchain is recorded and there is nothing left out. Once the action is recorded and stored in an information “block,” each block has a timestamp and is secured. The entire record is available to anyone in the decentralized system.

Blockchain Is Decentralized

Blockchain is decentralized and not stored on a single master computer or controlled by one company, bank, or organization. Rather, it is distributed over many computers that are in the network.


Think of decentralization like the way Google Docs work. You can share a single document with multiple users and all users can view the changes simultaneously. A decentralized blockhain is similar except information in a blockchain once verified is very hard to change.

Blockchain Is Permanent and Secure

As each block is completed, it joins the other blocks on the chain creating a permanent record of every transaction that is available to all the users of the blockchain in real time. This combination of features creates a high degree of security and makes the blockchain very difficult to change.

What Makes Up a Blockchain?

There are three basic parts to every blockchain.

  1. The record: This can be any type of information.
  2. The block: A bundle of different records.
  3. The chain: This contains all the blocks linked together.

When Was It Developed?

The idea of blockchain technology was first introduced in 1991 by researchers Stuart Haber and W. Scott Stornetta. In their white paper “How to Time-Stamp a Digital Document,” Haber and Stornetta explain the use of a continuous chain of timestamps to record information in a secure way.

However, it wasn’t until the creation of bitcoin in 1998 that the technology was put into play. Bitcoin was created to be a decentralized form of money, rather than money that was government controlled and created (referred to as fiat money). To create a decentralized system that functioned and that people could trust, the founder of bitcoin (anonymous person or persons known as Satoshi Nakamoto) created decentralized ledgers called blockchain.

The Steps in a Blockchain Transaction

Each blockchain transaction, no matter what industry the blockchain is being used for, goes through the same steps:

  1. The trade or transaction is recorded in a record. The record of the transaction lists the digital signatures from each party and other relevant details.
  2. The trade is checked to make sure it’s valid. The computers in the network look at the trade and make sure that it is a real trade or transaction. This is a decentralized process that occurs among the different nodes of the network.
  3. As each transaction is verified and accepted as being real, it’s added to a block. Each block contains a code called a hash that is unique to that block. The block carries its own hash and the hash of the block before it so that users always know where the block should be located in the chain.
  4. Once the block is complete—blocks can contain many transactions—it is added to the chain. The hash that it carries ensures that it is in proper chronological order

What Blockchain Means for Small Business Owners

No matter what you think of cryptocurrency, the underlying blockchain technology has many different uses and businesses are experimenting with its implementation at a rapid pace. Some small businesses, like tech startups, may develop blockchain technology themselves. Other small business owners may use blockchain technology that has been developed for the broader market.

Much like how Square and Stripe created easier access to credit card processing for small businesses, blockchain technology has the potential to make running a small business easier and smoother. Three ways this can happen include:

  • Smart contracts: Blockchain technology can be used to create, verify, and enforce contracts between users. It can be used to pay bills and employees, invoice customers or clients, create insurance policies, handle inventory fulfillment, or any other transactional activity. Companies such as dApp Builder have already developed the infrastructure to create smart contracts that businesses can then use in their own operations.
  • Data compliance: With new rules and regulations surrounding data compliance and data breaches, blockchain offers the ability to verify transactions without having to know the identity of the user. This can create a user experience that is more secure and less prone to hacking.
  • Digital Asset Transactions: If a small business is considering accepting payments in digital currencies or creating digital assets such as NFTs for your small business, you will need to rely on blockchains. Opening up to digital currency payments, may also help a business expand its customer base beyond traditional geographic boundaries.

The commercialization of blockchain technology is still early. In the future expect more and more blockchain-based services to be offered to small businesses as alternatives to current record-keeping and transaction processes. 

The Bottom Line 

Blockchain was originally developed as the platform that bitcoin was built on. Now, it’s more transparent, decentralized, and secure as it grows and develops in new areas of business, such as banking and supply chain management.


Blockchain technology can drive innovation for new ways of doing business and may be especially useful for companies where transparency and security are important.

In particular, small businesses can leverage platforms built on blockchain to streamline processes and payments. There are a few companies already offering this type of technology now, so expect to see many more in the future.

Frequently Asked Questions (FAQs)

Why is blockchain important for business?

Businesses large or small can both benefit from leveraging blockchains. Blockchains provide a way for businesses of all sizes to securely store their data, help them with digital asset transactions and increase automation through smart contracts. For larger businesses, blockchains can help with more transparency, instant traceability of data, improving efficiency. For smaller businesses, blockchains can open access to different payment systems and customer geographies.

How can blockchain help a small business?

Small business owners can benefit from interacting with blockchains in three major ways. Blockchains help with data security which means they can keep their transaction and customer data safe. Blockchains can open access to digital currency payments and transactions in digital assets that could help open them up to customers across the globe. Smart contracts, programs executed on blockchains, can be helpful in enforcing contracts.

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The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. National Institute of Standards and Technology. "Blockchain Overview."

  2. Stuart Haber and W. Scott Stornetta . "How to Time-Stamp a Digital Document."

  3. bitcoin. "Frequently Asked Questions."

  4. Deloitte. "Blockchain- A Technical Primer."

  5. dApp Builder. "Blockchain Application Builder for Ethereum dApps."

  6. World Economic Forum. "How blockchain accelerates small business growth and development."

  7. IBM. "Benefits of blockchain."

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