What is Digital Signature in Blockchain? (original) (raw)

Last Updated : 23 Jul, 2025

A digital signature is a mathematical scheme that is used to verify the integrity and authenticity of digital messages and documents. It may be considered as a digital version of the handwritten signature or stamped seal. The digital signatures use asymmetric cryptography i.e. also known as public key cryptography.

What are Digital Signatures?

Digital signatures use asymmetric key cryptography. Asymmetric key cryptography also known as public key cryptography uses public and private keys to encrypt and decrypt data.

The public key can be shared with anyone.
The private key is the secret key that is kept a secret.

In short, it can be summarized as a digital signature a code that is attached to the message sent on the network. This code acts as proof that the message hasn't been tampered with along its way from sender to receiver.

A digital signature is intended to solve the problem of tampering and impersonation and tampering thus it gives a recipient reason to believe:

The message is sent by the claimed sender i.e. **Authentication.
The sender cannot deny having sent the message i.e. **Non-repudiation.
The message was not altered in the transit i.e. **Integrity.

Why are Digital Signatures Important?

Digital signatures are important to achieve three results: Data integrity, authenticity, and non-repudiation.

**Data Integrity: It is preserved by using the hash function in signing and verifying algorithms. Any change in the message will produce a completely different signature. This way Bob can verify that the message sent by Alice was not modified along its way.
**Authenticity: The message is verified using the public key of the sender. When Alice sends a message to Bob. Bob uses the public key of Alice for verification and Alice's public key cannot create the same signature as Kev's private key.
**Message Nonrepudiation: Once the signature is generated, Alice cannot deny having signed it in the future, unless Alice's private key is compromised.

Suppose Alice creates a signature from the message and sends a message to Bob and a signature to the trusted center.

The center validates Alice's public key and verifies messages that come from Alice.
The center saves a copy of the message with sender identity, receiver identity, and timestamp.
The center uses a private key to create a new signature.
The center sends a message, a new signature, Alice's identity, and Bob's identity to Bob.
Bob verifies the message using the public key of the trusted center.

In the future, if Alice denies that no message is sent from its site, the center can show a copy of the saved message.

Conventional Signature vs Digital Signature

A document is signed to show that is approved by the user or created by the user. The signature is proof to the recipient that this document is coming from the correct source. The signature on the document simply means the document is authentic.

When Alice sends a message to Bob, Bob needs to check the authenticity of the message and confirm it comes from Alice and not Kev. So Bob can ask Alice to sign the message electronically. The electronic signature that proves the identity of Alice is also called a digital signature. Digital Signature needs a public key system. The sender uses a private key to sign a document and the verifier uses the public key to verify the document.

Below are the differences between conventional signatures and digital signatures.

S No.	Conventional Signature	Digital Signature
1	A conventional Signature is part of a document. For example, when a cheque is signed the signature is present on the cheque not on a separate document.	A digital signature is not part of a document. This means the sender sends two documents message and a signature.
2	To verify conventional signatures the recipient compares the signature on the document with the signature on file. So recipient needs to have a copy of this signature on file for comparison.	To verify digital signatures the recipient applies a verification technique to a combination of the message and the signature to verify authenticity. So here a copy of the signature is not stored anywhere.
3	There are One to Many relationships between document and signature.	There is One to One relationship between message and signature. Every message has its own signature.
4	Copy of signed document can be distinguished from the original signature on file.	No distinction can be made unless there is a factor of time(timestamp) on the document.

How do Digital Signatures Work?

Let's have a look at the series of steps involved in working of digital signatures:

**Signing the message with the private key: Digital signature is created using signing software that creates a one-way hash function of the data to be signed. The private key of the sender is used to encrypt the hash value generated. The encrypted hash value along with the hash algorithm constitutes the digital signature. The sender will now send the message along with the encrypted hash value to the receiver. The receiver can only decrypt the hash value using the sender's public key.
**Verifying the message with the public key: At the receiver end, there are two steps, to generate the hash of the message and decryption of the signature. By using the sender's public key, the signature can be decrypted. if the decrypted hash matches the second computed hash value then it proves that the message hasn't been changed since it was signed. If the two hash values don't match then it means that the message has been tampered with along its way.

Let's understand the above concept using an example:

Alice decides to send a message to Bob.
Alice creates the hash value of the document.
Alice uses her private key to encrypt the hash value.
Alice sends the document along with the encrypted hash value to Bob.
When Bob receives the message, he will use Alice's public key to decrypt the received hash value.
Bob will also generate the hash value of the message received.
Bob will match the two hash values and if the values match then Bob will be sure that the message has not been tampered with. If the values don't match then it is confirmed that the message has been tampered with.

Applications of Digital Signatures

Digital signatures can be used in various fields like Finance, Healthcare, etc. Below are some of the applications of digital signatures:

**Healthcare: Digital signatures are used in healthcare to improve the efficiency of administrative and treatment processes to strengthen data security. For example, for prescribing medicines and admissions to hospitals. They can be used to prevent fraudulent prescriptions and medical records.
**Legal: Digital signatures can be used to reduce the time to close contracts that require multiple parties to validate and sign them. Due to the immutable nature of the blockchain, the contract validity can be trusted thus allowing parties to sign the contract at their convenience.
**Government: Digital signatures are used by the government worldwide for a variety of reasons like processing tax returns, managing contracts, verifying B2G transactions, etc.
**Financial services: Digital signatures can be used in expense reports, audits, loan agreements, etc.
**Manufacturing: Digital signatures are used in the manufacturing industry to speed up processes like product design, quality assurance, and marketing sales. The use of digital signatures in Manufacturing is governed by organizations like ISO, NIST, and DMC.
**Cryptocurrencies: Digital signatures are used in cryptocurrencies to authenticate the blockchain, and manage transaction data associated with the cryptocurrency.
**Software programs: Digital signatures are used in software programs like browsers where a secure connection needs to be established over insecure internet.
**B2B communications and transactions: Digital signatures can be used to validate the source of the transaction and can only be sent to only intended party without any middlemen.

Digital Signature Algorithms

Below are some of the digital signature algorithms:

**RSA-based signature schemes: RSA is an asymmetric cryptographic algorithm. It can be used for performing a digital signature over a message. RSA signature is quite reliable, strong, and secure.
**Rabin signature algorithm: Rabin signature algorithm was one of the first digital signature schemes that were proposed. Hashing was introduced as an essential step in the signing process. It has relatively less use or standardization outside IEEE P1363.
**ECDSA: Elliptic Curve Digital Signature Algorithm (ECDSA) is bitcoin's current digital signature scheme. This scheme uses shorter keys and has few computational requirements than the RSA system. This scheme uses elliptic curves instead of finite fields and relies on the discrete log problem instead of the difficulty of factoring primes for security.
**ElGamal signature scheme: ElGamal digital signature scheme is based on the algebraic properties of modular exponentiation together with the difficulty of computing discrete logarithms. This is rarely used in practice. Its variant developed at NSA and also known as Digital Signature Algorithm is much more widely used.
**Schnorr signature: ECDSA lacks one important property i.e. there is no efficient way to compress and verify signatures together. Schnorr signature schemes are provably secure with standard cryptographic assumptions, non-malleable, and provide linearity.
**BLS signature: BLS digital signature scheme relies on pairings-based cryptography. BLS signatures enable key and signature aggregation but they are deterministic, allow signature aggregation across an entire block, and are approximately 50% smaller.

Benefits of Digital Signatures

Below are some of the benefits of digital signatures:

**Increase security: Digital signatures are based on the PKI technology through which the signature becomes part of the message and cannot be modified and removed. When a digital signature is created the time and IP location of the user get recorded in the audit trail embedded within the message.
**Time-saving: Digital signatures simplify the time-consuming process of paper-based transactions with manual tasks like darfting, printing, signing, scanning, and mailing. Digital signing helps to automate the manual work and reduce the long wait to few hours.
**Timestamping: Timestamping is importacnt when timing is critical. Providing date and time of a digital signature helps in time critical jobs like stock trading, lega; proceedings, etc.
**Cost savings: By going paperless with the use of digital signature, organizations can save money that was perviously being specnt on the physical resources like paper, office space, manpower hat are used to manage them.
**Workflow automation: Paper process requires anual tracking, accuracy, and coordination when the documents needs to be signed in the particular order and at the same time the data confidentiality needs to be protected. There are more chances of error, delays, mistakes but these can be cut out when using a digital tool that makes the workflow standardized, consistent, and error-free.
**Traceability: Digital signatures create an audit trail that makes internal record-keeping easier. There are very minor chances of mistake when everything is recirded digitally.
**Legally compliant: Digital signatures are enforceable in evry developed country worldwide. Digital signatures are generally considered the most secure type of e-signtaures aand can be used to sign most documents.
**Satisfied end-user: Users can sign from any device, from anywhere and at their own pace without physically visiting a branch, office, or store.

Limitations of Digital Signature

Below are some of the limitations of digital signatures:

**Theft of keys: Lost or theft of keys is one of the major drawback of digital signatures. The use of vulnerable storage facilities is one of the other limitation.
**Additional cost: To effectively use digital signatures sender and recieever needs to buy digital certificates and verification software at a cost.
**Need for standard: There is a strong need for a standard through which these different methods can interact.