A digital signature is a cryptographic method of authenticating digital messages, software, and documents. It involves mathematical algorithms and keys to create a unique imprint that can be easily verified.

Digital signatures are considered the electronic equivalent of a wet signature or a seal. However, they offer more robust security measures, effectively addressing tampering and impersonation in digital transactions.

Types of digital signatures

There are three types of digital signatures with varying levels of security:

· SES: A Simple Electronic Signature (SES) is the easiest to manage, but it offers the least validation. It is frequently used in low-risk communication.

· AES: An Advanced Electronic Signature (AES) uses a Certificate Authority (CA) to distinguish and authenticate the signatory. Companies often use AES when they require some level of visibility to ensure authenticity and integrity.

· QES: A Qualified Electronic Signature (QES) is the most robust authentication method and offers the highest level of assurance. It uses a CA, in-person or video proof of identity, and a Public Key Infrastructure (PKI) certificate to ensure authenticity.

Applications

Digital signatures have become the norm in most facets of business and communication. Their applications include:

· Electronic Documents: Signing and verifying digital contracts and other legal documents, including blockchain-based smart contracts to facilitate automated agreements.

· Online Transactions: Securely authorizing and authenticating financial transactions, including online banking and wire transfers.

· Government Documents: Ensuring the authenticity of government documents (permits, licenses, official communication, etc.), contributing to transparency and accountability.

· Health Records: Signing and securing digital health records to uphold privacy and data integrity.

· Cryptocurrencies: Authenticating the blockchain and managing transaction data.

Key components

Digital signatures incorporate two key components:

· Public and private keys: Asymmetric cryptography generates a pair of linked keys, public and private. These are used to encrypt and decrypt a message or document.

· Digital certificates: Issued by CAs to verify the public key’s ownership.

Digital signature vs electronic signature

A digital signature falls under the umbrella of electronic signatures. The latter is a broad category that includes any signature created electronically, i.e. without the use of tangible materials.

How digital signatures work

Digital signatures involve two core processes:

Creation process

The data is passed through a hash function which creates a unique imprint with fixed-length characters — hash value. This string is encrypted using the signer’s private key, creating a digital signature.

Verification process

The recipient uses the same algorithm to hash the data and decrypts the signature using the public key. If the hash values match, it means the signature is valid and the document is unmodified.

Benefits

Security

PKI technology offers a high level of security and authentication.

Efficiency

They can be integrated into automated workflows, cutting manual load and turnaround time.

Legal status

Digital signatures are enforceable in almost every developed country. The following laws apply:

· eIDAS regulation: The Electronic Identification, Authentication and Trust Services (eIDAS) regulation ensures that all types of electronic signatures can be used as evidence in EU courts.

· UETA and ESIGN Act: The Uniform Electronic Transactions Act (UETA) and the Electronic Signatures in Global and National Commerce (ESIGN) Act are two US laws that recognize the legal validity of electronic signatures.

Accessibility

Digital signatures benefit clients and stakeholders as they can sign from anywhere on any device, eliminating the need for physical presence.

Saves paper

Paperless signatures can reduce a business’s environmental impact and help save costs.

*Disclaimer: This content does not constitute legal advice. The suitability, enforceability or admissibility of electronic documents will likely depend on many factors such as the country or state where you operate, the country or state where the electronic document will be distributed as well as the type of electronic document involved. Appropriate legal counsel should be consulted to analyze any potential legal implications and questions related to the use of electronic documents.