What Is a Digital Signature?

As processes in the global economy become more digital and globalization allows workers and overall citizens to conduct their activities from anywhere in the world, it was only a matter of time until this process of digitization arrived in the realm of official signatures. Digital signatures are a way to solve the issue of distance and traditional methods of in-person recognition, with authentications that provide comfort and reliability to users without compromising their safety.

In this article, we explain what digital signatures are, the difference between digital and electronic signatures, the main advantages of utilizing such a framework and the general perks for society to leave the traditional methods for good.

What Is a Digital Signature?

A digital signature is a type of electronic signature that can be used to verify the identity of the sender of a digital message or the signer of a digital document. It is a security measure that employs encryption techniques to ensure that the document or message was not tampered with and was sent by the person who claims to have sent it. Digital signatures rely on a pair of cryptographic keys, one of which is a private key known only to the signer and the other a public key that anyone can use to validate the signature. The public key is typically embedded in a digital certificate, which functions as an electronic version of a passport or ID card, verifying the sender’s or signer’s identity. Digital signatures are widely used in e-commerce, online banking, and other digital transactions, and their importance is growing as more business is conducted online.

Digital Signature vs Electronic Signature

Source: AboutSSL

There is a bit of confusion online as to what can be considered a digital signature or electronic signature. Fortunately, the answer is simple: digital signatures are, as mentioned, cryptographic digital keys that represent the authenticity of a person or document when conducting a verification amongst different parties. Electronic signatures are simply the digital version of signing a document in written form - it does not use cryptography nor any similar security standard besides a touch screen with a touch pen that verifies your hand-written signature.

Why Use Digital Signatures?

Source: Digital Signature Certificate

In a nutshell, it is safer and far more practical than the traditional method. Think of a service contract being signed between a law firm and clothing conglomerate, where the law firm will provide judicial consulting to the corporation. Until a few years ago, the standard would be for the involved parties to meet in person to sign the documents - then have it recognized by a legal intermediary - or have the document sent by mail (not e-mail) until all handwritten signatures and certifications are collected. With digital encryption, the whole process can take less than an hour without anyone leaving their homes. Not only so, but digital signatures are safer as well; it is far easier for an ill-intentioned individual to forge signatures or pretend to be someone else, than it is for them to acquire access to encrypted keys and their respective access passwords.

Digital signatures are also thorough for any scenario, and can be applied to the following examples and more: legal contracts, lawsuits, protocols, medical reports, balance sheets and other financial reports, the family will, real estate contracts and transfers, investments, and more.

There are other key reasons to use digital signatures that make a drastic difference in people’s daily lives.

1 - Process optimization

As mentioned, collecting signatures and verifying all parties involved in a process becomes far easier with digital signatures than with physical standards. There is no loss of documentation, invalidation by page tearing, or long wait times for everyone in different locations around the globe to sign, everything is as instant as people’s availability to use their computers.

2 - Compliance

Nearly all countries in the world already developed their legal verification process for digital signatures, which results in far easier measures to have documents recognized and interpreted anywhere on the globe. For example: while legal details of a contract or transaction are certainly different in the UK than in Brazil, they both have very similar standards of digital signature verification in their laws - UK’s is ingrained in their General Data Protection Regulation while Brazil uses their Personal Data Protection regime, or LGPD in Portuguese nomenclature.

3 - Cost-efficient

Before digital signatures became popular, contracts of any kind between parties in different regions of the world involved a whole lot of traveling - really, a lot. With digital signatures that is no longer the case, as verifications can be conducted simultaneously from any location as long as all parties have document and internet access. People of course still travel to close important deals and finalize major contracts, but it is now an optional formality rather than a necessity.

4 - Sustainability

This one is a no-brainer. According to 2020 data from Statista, the world produces 420 million tons of paper each year, but such a huge volume has been on a consistent decline. Rest assured that digital signatures play an important role in that reduction - as do computers, smartphones and digital inclusion in general, of course.

How Digital Signatures Are Related to Crypto

Digital signatures are extremely important in the world of cryptocurrency. A digital signature is a mathematical technique that can be used to validate the authenticity and integrity of a digital document or message. It is essentially a method of proving that a document or message was sent by a specific sender and has not been tampered with.

Digital signatures are used in the context of cryptocurrency to ensure the security and integrity of transactions. When a user initiates a transaction, they create a digital signature with their private key. This signature is then sent to the network with the transaction, where it is verified by other users using the sender’s public key. If the signature is valid, the transaction is authenticated and added to the blockchain.

One of the primary benefits of using digital signatures in cryptocurrency is their high level of security. Because a private key is required to create a signature, forging a signature and stealing funds is extremely difficult. Furthermore, the use of public and private keys allows users to conduct transactions without revealing their identity.

Another important feature of digital signatures in cryptocurrency is the ability to use smart contracts. Smart contracts are contracts that self-execute because the terms of the agreement are written directly into the code. When certain conditions are met, these contracts are automatically executed. Digital signatures are used to ensure that the contract was signed by all parties involved and that it cannot be changed after it is signed.

Finally, digital signatures are an essential component of the cryptocurrency ecosystem. They provide transaction security and integrity, as well as the ability to use smart contracts. As the use of cryptocurrency grows, digital signatures will become increasingly important in ensuring the blockchain’s security and reliability.

Conclusion

There is no doubt that digital signatures, through cryptography and multi-layered verification methods, arrived to make our lives easier in many different aspects of our professional and personal routines. While hand-written signatures will certainly continue to exist as an interesting formality, they are no longer the main method of data recognition for private or public individuals. As the world dives deeper into the digital sphere, with the metaverse’s global adoption right around the corner, the cryptocurrency’s world growing day by day also with the use of smart contracts, digital signatures will no longer just be the most practical option for document verification; they will be the only acceptable one.