How do Digital Signatures Work

Digital signatures can be thought of as one of the electronic signature technologies but with a major difference – they ensure identity authentication and document integrity. They are often confused with electronic signatures (or eSignatures) but they are NOT the same, as will be clear with a deep dive into how digital signatures actually work.

Difference between electronic signatures and digital signatures

Most eSignature technologies offer some level of identity authentication and allow users to sign documents digitally. Where they both differ is in the level of security.

eSignatures often use common electronic authentication methods to verify the signer’s identity, such as an email address, a corporate username/ID, or a phone number/PIN.

Digital signatures, on the other hand, are considered the most secure because they use public key infrastructure (PKI) certificates from a Certificate Authority (CA). CA is an independent Trust Service Provider, which uses sophisticated cryptographic techniques to ensure the security of public and private keys. Both the sender and the recipient signing the documents must agree to use a given CA.

Another point of difference between both electronic signatures and digital signatures is their acceptance. While eSignatures can vary per industry, geographic, and legal acceptance, digital signatures comply with all the major international regulations such as GDPR in the EU and ESIGN Act in the US.

How do digital signatures work?

The primary reason why digital signatures are considered the most secure and preferred over other cryptographic techniques is that they ensure a document has not been altered in any manner when it is returned to the sender and that the sender cannot deny having sent it. This usually happens by establishing audit trails that provide documentary evidence of the sequence of signing activities that took place.

In pure legalese, they offer integrity, authenticity, and non-repudiation for digital documents or messages. Digital signatures use PKI, which involves using two related keys, a public key, and a private key. When combined, these two keys help in encrypting and decrypting a message using strong cryptography algorithms.

The public and private keys offer the signer a digital identity, which ensures that the individual who is signing a document is really who they say are. They generate a digital signature, as well as a timestamp of when the document was signed using the key. These keys are stored at a trusted CA.

Let us try to understand the inner workings of digital signatures using a scenario.

Alice is the sender and Bob is the signer.

Step 1: Alice sends the document to Bob through an eSignature platform.

Step 2: Bob receives the file, signs it, and sends it back to Alice.

Step 3: When Bob sends the file back, in the background, a digital signature is created via a hash algorithm. It produces a long hash key, which is encrypted using Bob's private key. The hash key is sent along with the original document.

Step 4: When the document reaches Alice, she receives a copy of Bob's public key. Alice verifies the signature by decrypting the file using Bob's public key.

Step 5: If both the hash values match, it signifies that the document has not been tampered with since Bob signed it. Alice knows that the document originated from Bob because only he possesses the corresponding private key.

Learn more about how to create a digital signature

Why are digital signatures important?

For precisely the process outlined above. More and more agreements and workflows are happening online, and it is critical for businesses to ensure the security and integrity of their confidential data. Organizations must be able to verify and authenticate that their data or documents have not been tampered with.

Some obvious benefits include:

  • Integrity: Digital signatures ensure that the document or message has not been modified since it was signed as any alteration would result in a different hash value, causing the verification process to fail.
  • Authenticity: Digital signatures confirm the authenticity of the sender. Only the person possessing the private key corresponding to the public key used for encryption could have created the digital signature. Therefore, the receiver can trust that the document or message was indeed sent by the claimed sender.
  • Non-repudiation: The digital signature prevents the sender from denying their involvement. Since the digital signature is unique to the sender and is mathematically linked to the document or message, the sender cannot later deny having signed it.