How Do Digital Signatures Work
Updated · Jun 03, 2022
How Do Digital Signatures Work?
Digital signatures are the key to paperless transactions.
They are used by everybody – from the government to the business.
Aside from convenience, they offer another great value – security.
So, how do digital signatures work?
In this guide, we’ll walk you through the entire process.
What Is a Digital Signature?
It’s exactly what you’re thinking – a virtual sign used for verification.
But instead of affixing your handwritten signature, you use a unique coded key to authorize an electronic document.
To do this, you need the help of online digital signature providers. They follow a cryptographic protocol called the Public Key Infrastructure (PKI). Basically, it uses a secure computation for protecting files – encryption.
Think of it like your virtual fingerprint or a stamp seal. It guarantees the identity, authenticity, and integrity of the file you are sending. This way, your file remains fully intact when it reaches the recipient. It adds that extra layer of security.
Alright, now that we’ve explained this, let’s move on:
How does a digital signature work?
It’s quite a techy process.
But don’t worry – we’ll make it simple.
How Do Digital Signatures Work?
Ever heard of cryptocurrency?
The technology behind it also applies to digital signatures.
That is public-key cryptography.
Here, a mathematical algorithm creates two codes – a public key and a private key. This pairing is the basis for the whole signature process, which involves encryption and decryption.
What’s the first step?
The digital signature algorithm uses the private key to encrypt the related data. This is called a cryptographic hash. Then, the data is added to the document. The parties involved receive them along with the public key.
When the recipient gets the file, they use the public key to decrypt that data. In this step, another hash value is generated on the recipient’s end. The system compares both hashes to verify the document’s authenticity. If they match, it means the file is, indeed, valid.
This entire process is also known as asymmetric cryptography.
To understand it better, here’s an example:
- Person A decides to digitally sign an email using their private key.
- Person B receives the email, plus a copy of Person A’s public key.
- If Person B is unable to access the file using the public key, that means the content has been tampered with. Therefore, the signature scheme is invalid.
So, that’s pretty much how a digital signature works.
Now you’re probably wondering, “How do I create a digital signature?”
We’ll show you how.
How To Create a Digital Signature?
To make one, the only thing you need is digital signature software.
This tool provides the complete interface for creating digital signatures online. Adobe Sign and SignNow are some great examples. These platforms can automate the signing process for you.
And it looks like this:
- Upload your documents
- Generate a key
- Send your signed files
- Track and monitor their progress
All in the same place!
Even if you don’t know how to digitally sign an electronic document, the software makes it easy for you.
So, those tech-loaded steps we mentioned earlier – cryptography and all – you won’t actually do them yourself. The tools above execute the entire signature scheme.
Now, what are digital signatures used for?
Digital Signature Use Cases
So, you just learned how to create a digital signature.
But where can you apply it?
Major industries are now using online digital signature solutions to streamline their operations. Those include:
In the age of paperless transactions, financial sectors now rely on this technology for all sorts of electronic documents. Some of the most common forms are loans, credit card statements, insurance policies, mortgages, and more.
Likewise, government entities use digital signatures to publish electronic versions of official documents. Laws, budgets, bills, and resolutions are a few examples. In addition, they also apply this scheme in areas like:
- Tax returns
- Business-to-government (B2G) transactions
- Public contracts
On the other hand, you can use a digital signature to sign documents you submit to the government.
Retail companies and startups digitally sign emails and messages to enhance their customer experience. It’s a modern alternative to traditional means of marketing and sales communications.
The healthcare industry also utilizes this technology to improve its internal communications. Administrative protocols, for instance. Medical institutions also use it to secure sensitive data. They apply it in electronic prescriptions, patient profiles, hospital admissions, and so on.
If you engage in cryptocurrencies like Bitcoin, you can create a digital signature to authenticate your transactions. You can also use it to verify your ownership of any kind of cryptocurrency.
These are just some of the areas where you can maximize this tool.
Now, to ensure the safety and validity of every transaction, all solutions must follow the Public Key Infrastructure (PKI).
What Is Public Key Infrastructure (PKI)?
As we said, digital signatures operate using the PKI protocol.
What is it?
Basically, it’s a mix of components – both software and hardware – that keeps all-digital signature transactions secure. It contains:
- Accredited organizations
Altogether, these factors play a vital role in how digital signatures work.
The major requirement in this protocol is this – each signature scheme must include a private key and a public key. The first one is exclusive to the signer. It will only be used to digitally sign a document. Meanwhile, the latter will be made available to anyone who needs to authenticate the digital signature.
Moreover, the PKI requires other essential components like the enrollment software and the digital certificate.
What Is a Digital Certificate?
Signatures can’t operate without a certificate.
So, what is a digital certificate?
It simply contains the public key that will be used for the signature. The electronic certificate also indicates the identity associated with that specific key.
Keep in mind that these are valid for a certain period. And more importantly, only an industry-trusted Certificate Authority (CA) can provide them.
These authorities are the ones who guarantee the validity of every signature scheme. They are third-party entities that act as middlemen between all the parties involved.
As such, they may require users to provide extra information to verify their identity. Those come in the form of:
- Personal Identification Number (PIN)
- Two-factor authentication
Now, is a digital signature the same as a certificate?
Not really. Here’s the distinction:
Digital Signature vs Digital Certificate
To understand the difference, let’s define each term.
First, what is a digital signature?
It’s a mathematical code that uses two keys – one public and one private – to authenticate documents. It’s like a virtual fingerprint that associates the user to a document. It also protects sensitive information in messages, by way of encryption.
Now, what is a digital certificate?
It’s an electronic document that contains the public key for the signature. Additionally, it identifies the organization involved in the signature scheme. With the digital certificate, users can confirm that the public key belongs to the person or entity who sent it. Only a trusted Certificate Authority (CA) can issue this document.
Basically, that’s the difference between a digital signature vs digital certificate.
What Are the Benefits of Using a Digital Signature?
After learning how to make a digital signature, you’re probably wondering:
Why should I use one?
Many advantages come with using this tool. Those include:
Adding a digital signature to your electronic document provides a secure channel for all parties involved. With this, you can be sure that files are 100% accurate and authentic when you send them to your recipients. Thanks to digital signature certificates, you can secure the identity and validity of all documents.
Traditional paperwork can be time-consuming. Printing, scanning, and sending papers to recipients may take days or months to accomplish. If you digitally sign them with software, it’ll only take a few minutes to produce the digital signatures and certificates.
In addition, most programs now offer document management tools for extra functionality. Here, you can streamline your paperwork with features like:
and many more.
Digital signature algorithms are based on existing laws, such as the E-Sign Act. As such, all documents containing digital signatures are legally binding.
On top of that, many regions now recognize the legality of digital signatures. So even if you’re sending an authorized file across the border, it’s possible to do so.
Businesses save a ton of money from using this technology instead of physical resources. A digitally signed e mail costs much cheaper than manually mailing a letter to the recipient.
By going fully electronic legally binding space yourself from the expenses of business management. No more spending on overhead costs like materials, manpower, office space, etc.
Another benefit that comes with digitally signing documents is traceability.
You store them digitally, so there are fewer chances of losing or misplacing your papers. This way, keeping records of your signed documents is easier. And, it’s way more secure than keeping them on your desk. You can also track the progress of your signature scheme.
Now, the only way to unlock these benefits is if you use the right platforms.
And which are they, you may ask?
Best Digital Signature Software
Let’s go back to the question – how do digital signatures work?
As we’ve explained above, the process is quite tedious.
But thanks to digital signing software, everything is pre-programmed. So, you won’t have to do the cryptography yourself.
Here are a few examples of those tools:
A lot of users trust this program when it comes to digital signature services. Here, you can set up a complete digital workflow for all your papers.
To add signatures, you can just build your “Agreements'' on the software and instantly send them to multiple parties. Its system is based on public key infrastructure, so you can guarantee 100% security.
Identity management is also a useful feature of this app.
With it, you can delegate specific user roles to collaborators, such as Sender, Signer, Approver, Form Filler, etc. This way, the signature process is easier to track.
SignNow provides an interface where you can fully automate your paperwork. Here, it’s easier to execute digital document signing because you can save templates. You can group them into categories or team files for smooth collaborations.
You have another option.
Aside from applying legally binding digital signatures, you can also use the standard electronic format. Yes, you can affix your handwritten signature – a virtual one. And the good thing about it is, you can use the system offline.
SignNow also offers extra document management features.
These include file sharing, merging, and storage. You can also integrate it with other business programs like Microsoft Office, Google Suite, Zapier, and more.
Another great platform for digital signature encryption is PandaDoc. Aside from instant document uploads, you can also draft legally binding electronic documents like:
Right there on the interface!
You can also use the program to safely collect e-signatures from multiple parties. There’s an Audit Trail feature that lets you keep a record of every paper you deliver. It’s also easy to track the progress of files to be signed.
It also adheres to the requirements of the PKI, which is a digital signature standard. Aside from that, it also follows existing regulations, like HIPAA and GDPR.
This software makes it a breeze to carry out any form of virtual paperwork.
Now that you know what is a digital signature and how it works, you’re ready to use one.
It’s fast, accessible, and way more secure for documentation.
As long as you use the right platform, you won’t have to waste time and money doing manual paperwork ever again.
We know, it’s kind of a techy process.
But when in doubt, just go back to this article.
It’ll guide you every step of the way!
How can I use digital signature?
- Financial statements
- Confidential papers
How do I digitally sign a document?
How does a digital signature look?
What is the difference between a digital signature and an electronic signature?
And how do digital signatures work?
Nero is an all-around wordsmith with a degree in Communication Arts— not the vicious emperor you might know in history books. He's an avid reader. A frisky writer. A tech enthusiast and occasional binge-watcher. He likes long walks on the beach. Enjoys deep thinking and shallow conversations. Hates ketchup. Panic! At The Disco.
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